The Rosenbaum Law Firm P.C. Blog

I’m not very popular, never have been and never will be. It’s probably my personality or just not wanting to go with the flow, but I’m not a popular guy. Ask my family, ask my former bosses. While I won’t win popularity contests, I’ll make it up in doing quality work and doing my best in my relationships with my clients and my referral sources. But popularity isn’t everything.

You should never associate popularity with quality because many times, they are mutually exclusive. Despite the fact that Apple computers are far superior to Windows based PCs, look who sells a lot more. Some of the most popular food establishments, movies, products, and services may be popular, but not be the best of the best.

So when a plan sponsor chooses a mutual fund, a financial advisor, a third party administrator, or an ERISA attorney, avoid just picking a provider because they are popular or have so many plans or assets under management. Look for quality over quantity. Look for the best, not the most popular. A lot of things popular in this retirement plan business isn’t very good.

My latest JDSupra.com article can be found here.

According to a new study, nearly half (47%) of all advisors selling 401(k) plans now recommend an external manager for target date funds rather than the proprietary target date funds offered by the plan record-keeper.

The study suggests that the target fund market is more competitive; I think it’s an issue of advisors trying to minimize liability. The rampant litigation concerning revenue sharing paying and proprietary funds are making advisors gun shy in just recommending the proprietary funds offered by record-keepers. The days where advisors would just make deals to select proprietary funds of the bundled provider are long over because of concerns that selecting mostly proprietary funds is a recipe for potential liability either through litigation or more eyeballs from the Department of Labor.

Just my two cents.

When I started my national single employer retirement plan practice, I learned that getting clients is something that was going to be dependent on me. Clients and referral sources don’t fall into your lap or grow on trees.

Before JDSupra and before Mike Alfred from Brightscope’s suggestion that I write on LinkedIn, I went to a lot of networking events to meet other business owners. Most of the events were a waste because these events didn’t have the people that could act as a referral source for potential clients.

Many times I would meet an insurance professional who would invite me to their office. The idea was that we could network, but often, the conversation would be about my financial status and my insurance needs. There was always the hint of the professional that they could help me get clients, but again, it was more about a sales pitch of what they could do for me.

When I meet any type of financial advisor, third party administrator, or accountant, I never ask who their ERISA attorney or who drafts their plan document. When you meet someone at an event or an office, they will learn what you do and if they like what they hear and have some trust in your abilities, they may call on your for work on their own plan.  If people know what I do, then they’ll call me if they have issue and think I can help them.

The retirement plan business is all about relationships. Any provider who is so intent on having you as a client with the implied suggestion that they could help you get clients is something to avoid. Too much of our industry is built on quid pro quos and the fact is that when someone told me that they could get me clients, they have never gotten me clients.

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

I don’t know what’s going on in the south shore of Long Island over the past few years and it wasn’t just Hurricane Sandy.

A few years back, the treasurer of my local school’s PTA stole more than $5,700 for her own personal use including thrown her daughter a party at the American Girls store. She got probation because her husband died drowning when his car went into the harbor while trying to escape from his attempted bank robbery. Her theft was small potatoes.

A financial advisor who was under investigation for stealing $400,000 from two clients, stole $1.6 million from the special needs camp that his child attended.

As the Department of Labor’s Phyllis Borzi once noted that multiple employer plans are suspect because one promoter of it stole $3 million from participant accounts (thanks Matt), I guess she might have issues about a PTA fund and a special needs camp fund because there were thefts there too. Of course, Phyllis, I’m kidding.

A simple second signature requirement on a PTA or special needs camp disbursement probably would have nipped those thefts in the bud or some sort of extra oversight.

Whether it’s a multiple employer plan or a single employer plan or  a hot dog stand, people will steal when there is no one looking. Is it easier to rob the local corner store or the Federal Reserve Bank in New York? Most thefts are usually involving small single employers plan where the employer is using employer money to float a failing business. A small plan with a  bundled provider is more likely to have a theft than a plan that requires an audit and has multiple plan providers. Bernie Madoff was only able to perpetuate his ponzi scheme because he was the advisor and the custodian, so he could claim where the assets where even though they weren’t there.

A multiple employer plan or a single employer plan are not vehicles for theft by themselves, they can be if  everyone is looking the other way.

As plan sponsors, it’s nearly impossible to make your plan theft proof, but you can make it more difficult by seeking enough independent providers that act as a check and a balance on the other providers and the plan sponsor.

Plan sponsors will say it all the time: they are too small to be sued in a class action lawsuit. That may be true, but a class action lawsuit isn’t the only thing to fear.

Most plans aren’t big enough to have a class action lawsuit against them, but they have other fears that plan sponsors aren’t even aware of. While a $1 million plan isn’t going to be sued by an ERISA attorney in a class action lawsuit unless they’re starving, retirement plans can be targeted by an employee or two to get a quick, inexpensive settlement or the government can audit them.

In the old days, it was kind of a blue line that most plan participants never crossed and the courts didn’t recognize a participant’s right in making sure that plan expenses are reasonable.

It’s been quite some time that unreasonable plan expenses have been an issue for plans and it went from plan sponsors winning on every turn into what looks like a Washington Generals type losing streak.

The days where plan sponsors can look the other way about their retirement plan is long over. They either need to shape up or get shipped out by participants and/or the Department of Labor.

My latest newsletter can be found here.

My latest JDSupra.com article can be found here.

I think there are two types of leaders: those who lead and those who are enamored with being a leader.

When you’re a leader and if you have people following you, you have the responsibility to lead. Being a leader isn’t just about making decisions, it’s about cultivating relationships with those that follow you. I have seen too many times in the past with student organizations or business, those that try to lead without communication and  not developing a consensus with their followers.

I once was part of a coup at the school paper to remove an editor in chief that I loved like a sister to me because she lived in an ivory tower when it came to leading. Her detachment from the rest of the staff was her undoing because she didn’t communicate well and was speaking badly of almost every staff member to every staff member. When we shared the comments made about us by her, it helped seal her fate. Almost 21 years later, I regret being a part of that coup because it could have simply been avoided by just hammering it out with an editorial board meeting.

Even if you fully own your business, it’s always important to speak to the “troops”. People are very sensitive, they want to be kept in the loop and believe that their work and dedication to you matters. Being a leader is more than just having the title. It means actual leading. It means listening to the people who are there to support you because if you end up mistreating them, people will turn on you when they can.

Like being a plan fiduciary, being a leader requires responsibility and leadership requires more than just having the position.