When it comes to plan sponsors in choosing providers for their retirement plan, I think one rule of thumb is to choose plan providers that are ahead of the curve. What do I mean by ahead of the curve? Retirement plan providers that are consistently innovators in the industry that started to change before change was required.
As often stated, I left the third party administration (TPA) firm where I was Director of ERISA Legal Services in early 2007 because I saw that fee disclosure was going to be the future for 401(k) plans and we were going to die. We were going to die because the people that were running the company had started this TPA 23 years earlier and were running it as if it was still 1984. Fee disclosure wasn’t something they ever intended to practice as they had an addiction to revenue sharing. I remember when automatic enrollment was finally made a part of the Internal Revenue Code in 2006 and I told the folks in charge at this producing TPA that pushing automatic enrollment was something we should push for our clients for a number of reasons (including the fact that it would increase assets under management). I’m still waiting to hear back from them.
What is a TPA that is ahead of the curve? A TPA who practices full fee disclosure before it was ever required.
What is a financial advisor that is ahead of the curve? A financial advisor who understand their role in assisting in the fiduciary process for the plan sponsor by developing an investment policy statement, constant review of plan investments, and offering investment education to plan participants. It’s also an advisor who is sensitive to the cost of plan administration and plan investments.
What is an ERISA attorney that is ahead of the curve? An ERISA attorney who is interested more in lowering the administrative costs and potential liability of a plan sponsor instead of how many hours they billed them.
Whether it’s exchange traded funds in 401(k) plans or ERISA §3(38) fiduciaries that will be the next big thing, always check the providers that are willing to try new things than those who stand pat and refused to change with the times. You either change with the times or the times will change you. Ask my two old bosses who can’t operate in the TPA space for the next couple of years and with their reputation in the business, may never work in this industry again.