The Rosenbaum Law Firm P.C. Blog

I treat people the way I want to be treated and I carry a grudge against the select few who didn’t treat me that well. For 7 years now, I’ve made the Managing Attorney of my old law firm as a punching bag of sorts. Sorry, Lois.

I use Lois as a punching bag because I can’t recall anyone who clearly had a disdain for me from the first day we met. Usually, I give people a good reason not to like me but she is the only person I ever met that I got the vibe that I disgusted her from day one. I have an Al Czervik /Rodney Dangerfield costume from Caddyshack and Lois was like Elihu Smails. Lois might have thought like Judge Smails that some people like me just didn’t belong.

Lois recently stepped down, as Managing Attorney after 15 years and 15 years would have been too long if she was a competent leader. When I started at that Firm, I was in awe of her and that awe ended at the same time we had a meeting with a Firm client that had ERISA needs. We were at the office of the client and their General Counsel/Chief Operating Officer was a former co-worker at some well known law firm in Manhattan. They hadn’t seen each other for quite some time and the General Counsel was talking about the hockey exploits of his son in high school. After the meeting was over, Lois told me that she really could have cared less about hearing about her former co-worker’s son and I was just shocked that anyone would talk about a client like that especially someone she worked with. I never looked at her the same way again.

Any successful business needs a leader and Lois wasn’t much of a leader. While she spoke as a leader, she had no vision and no strategy how to further develop a leading Long island law firm that withered under her indecisiveness. She placed the day-to-day administration of the Firm to a non-lawyer who only wanted to market his role as a law firm manager.

She set up a bureaucracy that didn’t allow me to develop a national ERISA practice because it made it impossible for me to cross-sell to firm clients and market myself nationally to non-clients. So when I didn’t bring in the business I could have, I was a failure in her eyes but I failed because I wasn’t given the tools I needed to succeed and the blame lays with the captain of the ship. When I talked about using social media, she dismissed it as something her attorney husband did like it was something beneath the Firm.

I like to be right, it’s one of my personality deficiencies and I was right about how I can actually market myself and I was right that Lois has no vision and leadership especially when I’ve met partners at Long Island law firms that have eclipsed Lois’ firm who have little respect for her firm. I won’t be surprised if that Firm is absorbed into another in the next 5 years. Sorry Lois.

What makes a good retirement plan financial advisor? Well it takes an attention to detail, an understanding of what the role entails, and a dedication to the plan sponsor client. In addition, what I find is the way a good financial advisor handles other retirement plan providers.

A good financial advisor will use other retirement plan providers to act as part of their team to offer the best overall retirement solution to their client. They will lean on the third party administrator (TPA), ERISA attorney, or auditor to assist with their clients and use them as a resource for any questions they may have, as well as a sales resource for potential clients.

When I was working for a New York TPA as well as in my practice today, I have helped advisors with potential clients. It’s a feather in an advisor’s cap as it shows a potential client that they offer white glove treatment if they can get a TPA and/or ERISA attorney to offer assistance without being retained first.

The not so good financial advisor sees themselves as an island, they are very possessive of their clients and are very wary of any provider encroaching on that client. They also have no use for any other retirement provider because they don’t value what they bring to the table. They only see other retirement plan providers as referral sources.

Financial advisors should target a few TPAs that they can work with and rely on with any proposals or any questions for potential clients and to assist current clients. They should also seek out an ERISA attorney who has an eye in developing relationships with the hope of getting business later, rather trying to charge for every phone call and every consultation. See them as part of your team to help augment your sales team, but they likely won’t be your sales team.

One of the things that most people forget about fee disclosure as it pertains to retirement plans is that it’s only applicable to ERISA based retirement plans. So non-ERISA 403(b) plans have no fee disclosure requirements and it’s sad when you consider that the non-ERISA 403(b) space is dominated by expensive insurance based providers. Teachers, who are always revered and loved are the ones most affected because school district 403(b) plans fall under that non-ERISA 403(b) label.

Teachers suffer an undue burden since most school districts offer multiple providers, so that competition actually increases cost because the providers have to compete assets.

Steve Schullo a former Los Angeles teacher is one of the leading advocates for teachers and the high fees they pay in their 403(b) plan. His work with the Los Angeles Unified School District was ahead of its time. Speaking about being ahead of its time, Connecticut made some welcome news that is cutting edge.

A new Connecticut law will increase transparency on fees and potential conflicts of interests covering non-ERISA 403(b) plans, putting them close to the same requirements that ERISA plans have to meet.

The law (proposed by State Representative Matthew Lesser) requires that a “political subdivision” — such as a school district that offers a 403(b) plan must disclose the fee ratio and return, net of fees, for each investment to each participant.

The law also requires that plans disclose “fees paid to any person who, for compensation, engages in the business of providing investment advice to participants in the retirement plan either directly or indirectly through publications or writings.” All disclosures must be made to participants annually and when they initially enroll in the plan.

Hopefully, more states will follow in providing protection to those enrolled in non-403(b) plans.

Researchers once looked at some data to try to figure out why many poor 401(k) investment choices linger on fund lineups. The researchers identified one fairly clear explanation: a sub-par fund is much more likely to stay on the menu if it’s managed by the mutual-fund company that’s helping administering the plan.

While it’s very easy to point to the Fidelitys and American Funds of the world for blame, the fact is that regardless of whether you are dealing with a bundled or unbundled product, poor investment options are dependent on the work or lack thereof of the financial advisors and/or the plan fiduciaries you hired as a plan sponsor.

My old law firm was using an open architecture platform where they had a fund lineup that hadn’t changed for 10 years. The culprit? The fact that they never bothered to hire a financial advisor until I told them it was a good idea. The fact that they didn’t hire any of the ones I recommended, that’s another story.

There are too many plan sponsors who don’t have a financial advisor and there are too many financial advisors who don’t do enough of a credible job to merit the fee they are getting.

Perhaps plans on mutual fund company platforms are more likely to have stinky fund lineups, but it’s still dependent on a plan sponsor and/or financial advisor not doing their job.

As I always said, change in the retirement plan business was going to spur consolidation especially after fee disclosures were implemented in 2012. Ascensus has taken advantage of this change by making many purchases. They recently purchased Kravitz and now have bought Benefits of Missouri.

Benefits of Missouri had over 800 defined contribution clients and with their unbundled approach, probably fit Ascensus’ targets. It allows Ascensus grow their footprint nationally as they are growing farther away from their Philadelphia area base.

My newsletter geared towards retirement plan professional can be found here.

My latest article for JDSupra.com can be found here.

The fact is that sometimes, bad things happen to good people.  That can be said about retirement plans and the good plan sponsors and providers who do their job. No matter how great a job you do, the threat of potential liability is always there.

No matter how you take care of your fiduciary responsibility and no matter how professional you are won’t preclude someone from suing them.

Just because a plan participant doesn’t really have a case against you or a plan provider that is doing their job, doesn’t mean they can’t sue. Competence doesn’t preclude frivolous lawsuit or litigation that has very little merit.  Competence will only mean that there will likely be no liability, just the headache of a lawsuit which can hurt you if you don’t have fiduciary liability insurance.

I know a fiduciary who was sued because the previous plan fiduciary stole money the year before. These things happen because sometimes when someone hires an overly ambitious litigator, people who get sued when they do nothing wrong.

We can talk about how plan sponsors and providers can minimize their potential liability, but they can never eliminate the threat of litigation.

President Obama’s myRA program was put out to pasture by the Trump administration because of high government cost and low participation.

The program was a laudable one it was a program for employees who didn’t have access to a retirement plan at work because their employer wouldn’t sponsor one. Employees who enrolled in myRA would be able contribute up to $5,500 a year, or $6,500 if they were 50 or older. That money could be deducted from their paycheck or they could remit payment to the government for their contributions.

The funds were invested in United States Treasury savings bonds, which paid the same variable rate as the Government Securities Fund, available to federal employees through the government retirement plan. Once a participant’s account balance hit $15,000, then it would be moved to an account that would offer stock and bond investments.

The program wasn’t popular, there were only 30,000 participant and only 20,000 had an account balance. The plan only had $34 million in assets and it cost the Federal government $70 million in expenses since 2014 with an expected $10 million in expenses each year. Only government can spend $70 million in expenses on a $34 million plan.

While people will claim that the Trump administration’s decision will cut retirement access to employees who don’t have one at work, the myRA program was no different than a Roth IRA and offered employees no tax advantage. I’m all in support of increasing retirement plan access, but the way to do is to offer incentive for employers to offer retirement plans. That’s why I still support the idea of open multiple employer plans that will help employers alleviate potential fiduciary liability and cut down on costs that go with small 401(k) plans.

It’s amazing that the Treasury Department under Obama offered quick guidance for the myRA program and State run IRA programs, but haven’t offered any guidance since that Advisory Opinion on that TAG multiple employer plan in 2012. Of course, myRA and state run IRA programs were pushed by the Obama White House and multiple employer plans were not. It’s my opinion that the best route for increased employee coverage under retirement plans is increasing the incentives for employers to offer them and there is no better choice than the open multiple employer plan.

My latest article for JDSupra can be found here.