The Rosenbaum Law Firm P.C. Blog

My latest newsletter can be found here.

When it comes to building a retirement plan practice, networking is an important component. Whether you are a financial advisor or a third party administrator or an auditor, placing an advertisement in the local newspaper or the yellow pages (if they still have them) will be costly and less likely to bring in clients. Fact is cultivating a close network of referral sources and spheres of influence will be more productive in netting clients than any advertisement or Google search analytic.

While networking is important, the right kind of networking is more important. What is the right kind of networking? Pretty simple, it’s about reaching the audience of potential clients and referral sources. Believe me, 3 years in to building my practice, I know the good and bad of networking.  The good networking is developing relationships with other professionals who can refer you business. Those can be accountants, attorneys (forget my old law firm, I had better luck networking with dead people), or other retirement plan professionals. Bad networking is networking with groups of people that can rarely bring you business. That can be networking with sole proprietors, networking with people who can not serve as a referral source for potential clients, or people who right off the bat, claim they can get you clients. I have been in business in one form of another for 14 years and I have never received a client from someone who claimed they can get me clients.

Networking is all about building relationships and building trust and it takes time. But there is a time, when you have to realize whether networking with particular groups or people are worth your while. I used to network with a small business group on Long Island for years. Nice people, attended a lot of events. Just never got a client, it wasn’t the right fit. People who are struggling in business have no money for 401(k) plans and if they do, a simplified employee pension plan is great because you don’t need an ERISA attorney or TPA for that. Funny thing is that I network a lot less than I did when I started my practice 3 years ago and I have more clients, only because I no longer concentrated time on the networking that wasn’t working.

My latest JDSupra.com article can be found here.

My latest JDSupra.com article can be found here.

The MTV reality series The Real World ends their opening intro by stating the show tries “to find out what happens… when people stop being polite… and start getting real.” As an ERISA attorney working with retirement plan clients I often find that what determines a good third party administrator (TPA) from a bad one is when we find out what happens, when the TPA gets fired, and we start getting real.

TPAs get fired for a multiple of reasons and for a good chunk of the time; it’s not for a lack of competence. TPAs can get fired for higher fees, change of advisors/brokers (who want to make the change), or because the brother of the law firm’s partner works for the mutual fund company that will now be the new TPA. So it’s business, not personal.

Again, it’s easy to determine who the good TPAs are from the bad ones. The good TPAs will not take it personally and will try to make the transition to a new provider as seamless as it can be. I think reputation means everything and since it’s such a close-knit industry, making it easier for a former client to transition business away from you will only help your reputation. Also, there is always the chance that the former client maybe your client once again, especially if the new TPA fouls things up. I always believe in the concept of paying it forward; that making it easier for former clients to leave will only make it easier for new clients to come in. The good TPAs will also spell out in their original service agreement with the client, the exact cost (if, any) of the de-conversion when the TPA is replaced.

The bad ones are easy to spot out. They take things so personally and they feel the need to take out the frustration of being fired on the former client. Again, it’s business, not personal. I had a client who changed TPAs a few years back. During the change to a new TPA, an IRS audit discovered that the Top Heavy test was done incorrectly because a couple of law firm partners were misidentified as non-key employees. Rather than admitting the error, the TPA placed blame on the client for the error and then whined that the client still did not pay all their invoices, forgetting that the client had spent thousands in legal representation to correct that Top Heavy error.

Divorce can be difficult, changing TPAs should not. I think it’s important for TPAs should maintain a high level of professionalism, especially when it comes to the time when the TPA is being replaced because it’s at those times that delineates the good TPAs from the bad ones.

While the folks in Cyprus can lose up to 10% of their bank account balance to help a European of their island nation, many point out that this may happen to us with our 401(k) and IRA accounts.

We are in a financial mess with trillions of debt and no end in sight of paying it off. While some on Capitol Hill talk about replacing 401(k) accounts with guaranteed payouts from the government, we can remember what government did to Social Security. We aren’t Cyprus, at least not yet. There is $5 trillion in IRA accounts and about $4 trillion in defined contribution accounts, we just need to make sure that our government representatives don’t think of our retirement piggy bank as their piggy bank in order for them to pay off the bills that they have run up and will become due.

While we shouldn’t be pulling money out of your 401(k) plans because the sky isn’t falling, we should always be cautious with what Washington has to offer us.  Any deviation from our current retirement plan system should be met with skepticism. We’re not Cyprus, at least not yet

My latest JDSupra.com article can be found here.

Forbes had a nice blog post on how 401(k) plan fee disclosures are misunderstood.  According to a survey they cited, 22% of all plan participants still think that they pay nothing for the administration of their plan. That’s actually an improvement when it was 38% before fee disclosures.

While fees for 401(k) plans are in the 1 to 2% range, 25% of the participants who thought they paid fees thought that they paid 25% in fees!

What does this mean? I think a good part is that plan participants don’t read fee disclosures and if they do read fee disclosures, they may not understand that. That is why I believe that fee disclosures to plan sponsors and plan participants should have less jargon and be clear. Also, fee disclosures have been in place for only about a year, any major difference in participants’ knowledge will take time. All I know is that we still have work to do.

My latest newsletter geared towards retirement plan providers can be found here.

My latest JDSupra.com article can be found here.