The Problem with Giving Away Free Plan Services

In my previous life (long story), I had a brother in law.  Yes, one of those. Despite similar interests, we were never friendly mainly because he had the personality approach that he didn’t care for anyone else. He wasn’t shy with his relatives; he just didn’t care for most of mine. When he was dating my sister, I had tax preparation service where I drafted income tax returns for a flat fee of $150 (it wasn’t very successful).

My sister wanted to use my tax software to complete my brother in law’s (he was the boyfriend at the time) taxes. I said that she could prepare the return as self prepared, but there was no way that I would sign the tax return. I felt the fact that he could use my tax software for free was enough; I didn’t have to sign it for it to be filed.

My point of refusing to sign the return was unpopular, but felt that it had to be taken. My view is that my time and work is valuable and if you give you something for free, it really has no value to the one receiving that free service because they feel that it’s not worth anything if they get it for free. Free services is not the same as getting a free IPad for signing up with a cable provider because people can assign a value to an IPad and have no idea the value of a service.

So when I hear plan providers giving away free services such as a free investment lineup review, I have a lot of fear that these providers are giving away something of value to plan sponsors who don’t think it has any value. A financial advisor giving away a fiduciary analysis to a potential client plan sponsor probably finds a lot of time that they gave away something for free when that plan sponsor retains their current advisor.

Believe me, I know. As you know, I do a plan review called the Retirement Plan Tune-Up for $750. While I think the price can’t be beat for the level of review, I have not made as many of these reviews as I think the markets warrants it. A year or so ago, I was contacted by a Northeast registered investment advisor who suggested we could team up on these reviews to his current or prospective clients. He asked if I could do a Plan Tune-Up for a prospective client with this first review being on the house. I did it for free and it’s been about a year and a month since I have heard from him. I gave away something of value for free and got the short end of the stick. Needless to say, that was the first and last of the free Retirement Plan Tune-Ups.

So my two cents is that any service you’re interested in giving it away for free, ask for some remuneration even if it’s negligible because it at least demonstrates to the plan sponsor that it has some value and therefore, can’t be chucked away as yesterday’s garbage.

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