Advisors Advantage

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As A Plan Provider, How You Can Deal With Clients

My latest article for can be found here.

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Stick to your price

The only bad thing about smartphones is when you have to shop for another one. So my wife and I went to the local Costco and the representative there who works for an unaffiliated cell phone service selling company approached us with a great offer. If we switched from Verizon to TMobile, they would give us the new iPhone XR, which is better than the 7 I have now.

My wife was a little hesitant because she thought the best deal we could get at TMobile was a buy one, get one free. The representative told us that he had the special deal and all we would have to do is pay the tax on the phones. My wife wanted to shop, so she told the representative she’d come back after shopping. So when we come back shopping, the representative told us that his deal expired and the only one left was that buy one, get one free that every TMobile store had.  My wife and I left in disgust because either the representative was trying to scam us into buying the phones or more likely, he had no idea what the pricing was.

When dealing with potential clients, there is nothing worse you can do if you get the price quote wrong and you have to come back with a more expensive price. It betrays the growing confidence and trust that this potential client has in you. Trust and confidence are bug things in the retirement plan business and anything that chips away at it is going to hurt you in the long run. You need to be careful about how you price your services and if you make a mistake, I suggest you live with it.

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The lesson of Sam Adams

When I first started drinking beer, I hated it. Then again, when it came to the quality of it, it wasn’t very good. Whether it was Coors Light or Bud or even the bitterness of Heineken, the beer I was drinking wasn’t very good. When you ’re a kid in college and your budget is tight and your friends are drinking too, you’re limited to what you can get at the local 7-11. Most of the time it was Michelob, sometimes we’d be lucky and Molson’s was the same.

Around the time of the beginning of my senior year, I constantly heard radio ads for Samuel Adams beer and how it was winning all these awards.  The first time I brought it (Boston Lager), I was with friends in Vermont during winter break and it was something totally different. It was a quality beer. I later found out they had additional varieties including the long gone Double Bock, Scotch Ale, and Honey Porter (I wish they would bring them back). I even visited their brewery and took the tour three times in Boston, it’s still my favorite beer brand more than 25 years later.

What’s the point besides beer? The point is that Sam Adams stressed a quality where there really wasn’t any. The Boston Beer Company (the parent company) brought the idea that beers can have a premium taste and a premium price. It launched the micro-brewery revolution that showed that beer didn’t have to taste like malted water like Bud, Miller, and Coors. As a plan provider, you can step up your game by offering a premium level of service when others don’t. Remember those advisors who were touting 3(38) 10 years ago when others weren’t? It’s the same concept. You can up your game and increase the statute of your service by going premium by your level of service and you can afford to charge a premium price Give clients something that other providers aren’t offering.

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Cash balance is worth the discussion

When talking to a prospective client that deals with professional services or have deep pockets, it’s always worth a consideration on whether a cash balance is a good idea. When coupled with a safe harbor 401(k) and new comparability, cash balance actuaries can work some magic and provide huge contributions to the plan sponsor’s owners and key decision makers.

Clearly, there are some prospects that don’t have the budget for it or maybe have too many employees to make it work, but I still think it’s worth the discussion because most advisors never bring it up because they don’t understand it.

Cash balance is an important conversation that you can start to allow yourself to stand out in the business.

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The Rosenbaum Law Firm Review

My latest newsletter is available here.

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401(k) Options That Must Be Obligatory For Plan Sponsors

My latest article on can be found here.

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Fees still are a big concern

Callan’s annual Defined Contribution Trends survey listed fees as plan sponsors’ main concern when dealing with their retirement plan, ahead of education and communication. Four years ago, fees were only the 4th main concern.

What does it all mean? It means that plan sponsors are certainly aware of the litigation over fees as well as hearing about fees from their plan provider or competing plan providers. It also means that pressures on pricing will continue and the question is whether further consolidation will lead to more competitive pricing.

So while retirement readiness and participant communication should be emphasized, you should also not lose the current focus on fees.

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Duke University settles their 403(b) lawsuit

Over the last 35 years, Duke University has had a championship basketball team on the court. In another court, Duke didn’t do too well.

Duke University just settled a lawsuit alleging that it mismanaged its 403(b) plan for employees for $10.7 million. Plaintiffs in the case were represented by well known ERISA litigator, Jerry Schlichter.

Before the Duke settlement, universities were on a winning streak in beating back 403(b) fee lawsuits. It just proves that every case is unique and every university has to make the decision whether it’s costlier to settle or costlier to fight.

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The end of the determination letter program and what it means

For the past 15 years, it’s been apparent that the Internal Revenue Service (IRS) wanted to be out of the favorable determination letter business. Over time, the IRS was limiting when they would issue determination letters.

When I first started in the retirement letter plan business, it was pretty much required that every retirement plan document that wasn’t a standardized prototype should get one. Then the IRS ruled that every line by line adopter of a volume submitter or prototype document (including non-standardized) didn’t need one either. Then they pretty ruled you only should get one when it was an initial plan document and when the plan was terminating.

What does it mean? It means that the IRS wants their agents less focused on opining how documents are drafted and more emphasis on voluntary compliance program applications and more audits. It means that since plans can no longer rely on IRS approval on their plan documents, they will need to have more emphasis on making sure that their plan document and their plan operation are in compliance, especially if there are more IRS audits in the field.

I recently spoke to an IRS agent about a determination letter application for a plan termination and he indicated major changes in his office and his change of operation to handling VCP applications. Less determination letter requests mean less work in my office for the last 8 years in that part, but it means I’ve had more work in voluntary compliance submissions, as well as late deposits of 401(k) deferrals.

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