What you are about to read is a true story and probably summarizes my two year stint at a semi-prestigious law firm. When I first started there in 2008, the Managing Attorney For Life asked the human resources director to contact me about the Firm’s 401(k) plan.
My idea in joining that law firm was to start a single employer retirement plan ERISA practice since the Firm only had a multi-employer (Union) practice. The idea was to go national and reach out to financial advisors and third party administrators that was going to use my writing and social media to build a brand. Sound familiar?
Well the H.R. director told me that she along with an ERISA partner and a property tax partner were the trustees of the plan, with the ERISA partner just leaving the firm as his office was spun off as a separate firm.
I was given a mutual fund lineup and while it was 2008, the lineup was 1998’s greatest hits. The fund lineup wasn’t updated in 10 years, the plan had no financial advisor, there was no investment policy statement, and plan participants got no investment education other than some Morningstar profiles. In addition, they never reviewed the third party administrator’s work or benchmarked the fees.
I told them that they were breaching their duties as plan fiduciaries by running the plan this way. I suggested they hire a financial advisor and I recommended a few advisors that I knew did quality work. The TPA’s fees were unusually low and I advised them that the TPA was getting revenue sharing payments from the mutual funds in the Plan, which the trustees swore was not true (but actually was).
I gave them the names of a few advisors who were interviewed. In addition a mutual fund company TPA that I recommended as a potential fit for the firm recommended an advisor they should speak to. Of course, they hired the advisor I didn’t recommend and I was given no insight into their decision-making nor was I consulted in any way.
When it came to changing the TPA, I was completely left in the dark. The mutual fund company TPA I initially recommended was interviewed along with an insurance company TPA which I found a little odd since the plan did have $25 million+. I had other TPA suggestions, but I was never consulted. I never knew TPAs were being interviewed until the rep. from that mutual fund company told me. Well at the end of the day, the insurance company won out even though the advisor that the mutual fund company TPA recommended was hired and apparently didn’t return the favor if you know what I mean. Other than getting a few jabs in a few years later, my point is that the folks who were comatose for 10 years were probably the least informed in making any decisions. The problem is that this was a place where associate attorneys should be seen and not heard even though I was slowly becoming a National expert on 401(k) issues revolving fiduciary liability and plan expenses.
Plan sponsors who seek out guidance from an independent retirement plan consultant, a TPA, a financial advisor or an ERISA attorney should actually listen to that guidance and use that guidance as a template in making informed fiduciary decisions. What’s the point of hiring such professionals if you won’t keep an open mind and hire a plan provider who is so clearly not a good fit? Look at the experts you surround yourself with, look at their background, determine whether they can give you advice, and listen to it if it’s sound. If you decide to go another route, that’s fine because you are on the hook if things do go south, but at least you consulted with the retirement plan experts who likely know more than you.
A friend of mine who is a salesman at a TPA that I would have recommended if I asked told me he knew I wasn’t going to last there when he heard the story about the plan provider selection. He was right, I am in a far better place.