Be Wary of Plan Providers with Gray Hats

One of my favorite genres is the Western.  While I prefer the works of Sergio Leone and Clint Eastwood to those of John Ford and John Wayne, I have always been a big fan of these films. I always like the idea that the good guys wore white hats and the bad guys wore the black hats.

Of course, my favorite Western, Unforgiven, shakes all that up because the people wearing the white hats aren’t necessarily that good (Gene Hackman’s Little Bill) and the people wearing the black hats aren’t necessarily that bad (Clint Eastwood’s Will Munny).

When I talk to advisors and third party administrators who do terrific jobs at fully, transparent fees, I always state: “that since we all wear white hats, we all should stick together.”

The problem is that with fee disclosure, there are a lot of folks wearing what I call gray hats. Gray hats meaning that these were former black hatters either trying to reform the way they handle the retirement plan business or those pretending that they are one of the good guys.

That may mean providers that were always hiding fees or were just too expensive offering “fiduciary services” like a fiduciary warranty or the use of an ERISA 3(38) service through a third party.  Perhaps these providers have seen the error of their way and are now going to be good retirement plan industry “citizens”, and maybe they haven’t and this is some marketing gimmick. How will plan sponsors know the difference?

We live in a Google world, which means things are certainly more transparent. So if a financial advisor writes an article on an RIA website telling advisors how to get their clients out of fiduciary trouble, Google will let you know that this fellow doesn’t have a sterling reputation and he was accused of some of the things he was warning against which landed plan sponsors in fiduciary trouble.  I believe that people and plan providers have it within themselves to change and improve their services and business model, but it must be judged by deeds and not by words or articles or fancy pamphlets.

If I’m a plan sponsor, I need to do my due diligence on the providers I’m considering. However, would I be better off with providers who practices full transparency before it was fashionable and required, or to do I hire a provider that had a poor reputation in this industry who is trying to change their ways and not try to acknowledge their past? Despite Unforgiven, I feel safer with the folks in white hats.

This entry was posted in 401(k) Plans, Retirement Plans. Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *