Scary Fact About Retirement Plan Providers

With apologies to Tod Higgins (played by Keanu Reeves) in “Parenthood”, you need a license to practice law to be an ERISA attorney, you need to be a CPA to be a retirement plan auditor, you need a securities license to be a financial advisor, but any shmuck can put out a shingle and call themselves a third party administrator (TPA).

There is no required training or licensing for someone to operate a TPA business and I find that scary for a position that requires such knowledge and expertise to do the job of plan administration and recordkeeping properly.

So when looking for a TPA, look for any ASPPA designations or other accreditations such as an enrolled actuary among the professionals you hire as your TPA.

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One Response to Scary Fact About Retirement Plan Providers

  1. Ary, I agree with you, ASPPA’s and other professional organization’s credentials are an important symbol that the individual holder of such designation(s) has demonstrated a degree of competence and understanding in the qualified retirement plan administration field. Having been a member of ASPPA since 1975, (my member # 000125), and having owned and operated a TPA for almost as long, I truly believe that the pension industry has benefitted greatly from the efforts of ASPPA.

    But having said that, if our and our industries’ goals are to elevate the level of expertise, understanding , competency and innovation in the field, I believe we need to do more than just support continuous education and the acquisition of professional designations. That is:
    1. Attract people to the field that have a higher likelihood of being or becoming more competent (on average) than the past people (generally) who have entered the field.
    2. I am surprised that a field such as this, that needs a constant flow of new labor, and that requires a vast amount of knowledge, skill, etc. is not taught in most colleges including business schools and law schools. In fact, I do not believe that, at the college level, there is even much talk about the Qualified Plan Business as being a field to make one’s specialty or career. Without some publicity for this field and our industry, and without an available curriculum that is offered at a college level, I suspect that we will not attract the right people to this field.
    3. Good people cost money. Just like good teachers cost money. But with respect to having enough money to attract and keep highly competent, high achievers and performers, as are needed, I think many current decision makers in the TPA industry have focused on the wrong thing to get more business, wether it be from referral sources or direct. That is, there has been major attention and a consequent thrust by most TPAs to compete on price first and competence second. This more that anything else has been responsible for the services of a TPA to be considered, by most unfortunately, as a commodity. To me, as an Economics Major in undergrad school, it is contrary to all I was taught about “commodity pricing” to have the services of a competent TPA, considered as a commodity. Frankly, I think that the financial services industry has been responsible for this price squeeze foisted upon the TPA industry, because low TPA fees seemingly make it easier for a financial salesperson to sell their investment services to their prospect. So, if you agree that this is true, doesn’t it seem reasonable that low fees mean low profit margins, and don’t low profit margins make it harder to pay higher wages to attract more capable people?

    So, what can we do:
    1. I do not have any influence on colleges to get them to help our industry, but perhaps if anyone that is reading this has, they would pass along my thoughts regarding adding a pension class to their business/accounting class schedule.
    2. TPAs must value the work they do and value their own expertise and effort enough to realize that the financial service sales person needs you more that you need them. Personally, I am considered an expert in Qualified Retirement Plans, Investments, and the Life Insurance fields. I guarantee you that the Qualified Plan field is the hardest and most changing and therefore the most challenging of all. Frankly, investment advisors would be correct to say that they are also faced with challenges as well. However, if they are competent, their challenge is more based on the fact that “luck” plays a big role in the outcome of the work they do for the client, rather than the obvious challenge they have to develop a proper plan for their client. What I’m trying to say is that their job is easy compared to that of the TPA or the ERISA attorney. What’s hard about their job is dealing with the constant uncertainty facing their investment choices being made for the client. To be a good TPA or ERISA attorney is not based on luck, it is based on competence.
    3. As an industry, let’s stop trying to point out how fees should be less because one professional thinks the other professionals’ pricing is too high, etc. Let’s not shoot our industry in the foot and create profitability problems for all of us and therefore not be able to afford good people and resources as needed. Let’s let the buyers and the market place decide what prices should be, not ourselves by pitting us against each other. And let us all value the work we do and be proud to bring the proper level of ability and competency to our industries workforce.

    Thank you for listening.

    Herbert N. Glass, CPC, MBA, CFP, ChFC, CFG, CLU, LIC
    President
    Glass Retirement Strategies, Inc.
    http://www.glassretirement.com

    3.

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