Why Financial Advisors Should Be Concerned Over TPA Referrals

A friend of mine and I were talking about a financial advisor that we knew that had a tremendous and respectable book of 401(k) business and how he actually uses a payroll provider for the third party administrator (TPA) for many of his client’s plans.

As many of you, I have a tremendous bias against payroll provider TPAs because I think they do a poor job of what they are supposed to do, actual administration. Regardless of my bias, I believe that a financial advisor with a book of business should always consider the TPA they refer business to because I believe that more clients leave a financial advisor over the terrible job that a TPA did that the advisor recommended than on the actual performance of the financial advisor.

I always point as an example of an excellent financial advisor from the Mid-South who brought my TPA quite a few cases. We did a particular poor job of administering the plan and the client was interested into adding an employee stock ownership provision to the 401(k) plan that people call a 401(k)SOP. Rather than sending an actual ERISA attorney like me who understand the mechanics of the Plan, they sent our fearless leader who was an ERISA attorney, but was more salesman in those days. Our fearless leader went down south to meet the client and proceeded to do such a poor job of presenting the concept of the 401(k)SOP that not only did we lose the client, but so did this terrific advisor. There can be a high price for a referral made.

Referrals are an important part of the 401(k) plan business and I have been a fortunate recipient of referrals from TPAs and financial advisors nationally and it is incumbent on me to do my best because I want to do the best job possible (as a professional) and I do not want to disappoint the people that have referred me business.

A financial advisor should consider the TPA referral they make. Price should never be the only factor because with most TPAs, you do get what you pay for and a financial advisor should only use a few TPAs because one TPA can’t handle all different types of retirement plans for all different sizes. A TPA is like clothing, it has to be a proper fit for the client and financial advisor because if it doesn’t fit, the financial advisor will get quite a bit of the blame.

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2 Responses to Why Financial Advisors Should Be Concerned Over TPA Referrals

  1. Everette Street says:

    Disclaimer: I work for a payroll provider TPA (so I’m on the defensive while reading the remainder of your post when the 2nd sentence slams ‘us’).

    You don’t like payroll provider TPA because they do a poor job, but your example of a TPA doing a poor job is your old TPA- which I gather is not a payroll provider TPA.
    “A financial advisor should consider the TPA referral they make.” -Well said.

  2. Pingback: Why Financial Advisors Should Be Concerned Over TPA Referrals … | indicard.com

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