The Rosenbaum Law Firm P.C. Blog

My latest JDSupra.com article can be found here.

Regardless of the business you’re in, one of the worst thing you can do in being the decision maker for your retirement plan is that you know better than most retirement plan professionals.

No plan sponsor likes to get the unsolicited phone call from the retirement plan professional that their plan is too expensive or that the funds should be replaced. However, when you keep on running a plan so poorly, maybe the problem could be with you and there is nothing wrong with admitting that you could use some help. Retirement plans are completely different from any type of business or human resources function, so its OK to seek help. The worst thing you can do is think that you know best especially when you don’t have the background to make an educated decision.

I have always mentioned the certain issue of a former human resources director at a former place of employment. She clearly runs the human resources department as her own little fiefdom. I assume that, because her poor management of the firm’s 401(k) plan would get her fired at any place else. The 401(k) plan was poorly run before I arrived at that firm. The 401(k) plan offered no investment education to plan participants and investment options weren’t changed in a decade because there was no financial advisor retained by the firm. While I suggested interviewing certain TPAs or selecting certain financial advisors, she knew better than I did. Of course, the plan is still poorly run. I know that for a fact because I was recommended by outside advisors to help them with a severe plan error. Of course, the human resources director can hold a grudge (I did lambaste her for the past 4 years) and my offer to help was rebuffed. Her management of the 401(k) plan has always led to problems with the 401(k), so how good is it? It would be better for her to have hired a fiduciary who can assume a good chunk of the liability of the fiduciary process of the plan and the day to day administration, but she knows best. She would rather stand Pat, than improve the plan.

Arrogance may work in business, but it is a character trait that spells doom for a 401(k) decision maker.

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

My latest JDSupra.com article can be found here.

My latest newsletter can be found here.

I made peace with one of the biggest enemies I had professionally and it’s something I’m proud of. We both admitted we were wrong and acted in haste because of a lack of communication and it was good for business to make peace. There was something in it for both of us.

Around the same time I had this fallout professionally, I had a personal relationship that went up in smoke (it was coincidence, I assure you).  Now that relationship has not been repaired because the side who hurt me still thinks they did nothing wrong and there is nothing in it for me to make peace because when friend or family isn’t there for you when you really need them, what use are they?

When it comes to making friends in the retirement plan business or trying to make it in the retirement plan business, you have to understand that the other side needs to find something in it for them.

When I worked at that law firm to try to build a national ERISA practice, I decided to start relationships with financial advisors and third party administrators (TPAs) because the law firm partners weren’t referring me business even though there was something financially in it for them. When I met advisors and TPAs to tell them how my practice would help their plan sponsor clients, there was a little interest. I only started to gain traction when I had my own practice and my articles helped these advisors and TPAs in their marketing.  Some of the time, people will help you. When they discover you could help them, almost all of the time people will help you. It’s human nature for people to be selfish, use that knowledge to help you in your selfish pursuits.

On LinkedIn, I post a lot. One time I posted and some insurance agent that I didn’t know posted after one of my posts and asked me when I can sit down with him and discuss with him what he could do for my clients, First off, I didn’t know him and I thought that was way too forward. Secondly, I think the advisors or TPAs who referred me these clients would have a problem with that. I don’t suppose the agent thought what might be in it for me.

Any relationship in the retirement plan business must be mutually beneficial to succeed. So rather than just looking what’s in it for you, ask yourself what’s in it for the other side.

My latest JDSupra.com article can be found here.

My latest JDSupra.com article can be found here.

We are a nation of over abundance and we should be grateful for that. The problem is that over abundance can lead to a life of excess. We are often told that more is more and the problem is that there are many times where less is more.

When it comes to participant directed 401(k) plans, one of the greatest examples of over excess is a fund lineup.  There are thousands and thousands of mutual funds out there, so many financial advisors and plan sponsors think they should contain as many funds as they can. You often find plans with 20+ mutual funds in the lineup and I once came across one plan with 53 different investment options. Why so serious about this issue? It’s pretty simple.

Studies have shown that too many funds on a plan’s investment lineup actually lowers the rate at which participants defer their salary in a 401(k) plan. Why? Too many funds, especially in one asset class have the ability to confuse and overwhelm plan participants and overwhelmed plan participants are less likely to defer than those that aren’t.

The solution? Start pruning a plan’s fund lineup. I think 12 are more than enough funds in a lineup, maybe 15 at tops. No need for 25 or 53, there is any reason for three large cap growth funds in any lineup.  Plan sponsors need to have their employees defer in a 401(k) plan for a wide variety of reasons, so why get in the way with too many funds on the investment lineup?