The Rosenbaum Law Firm P.C. Blog

One of my favorite sayings is that “the road to hell is paved with good intentions.” To me, it means that good intentions could have some bad results.

A big part of my practice has been helping advisors and brokers get business, either through serving as counsel or trying to partner up and get clients together.

A few years back, I met a broker who really wanted to put a name out for himself and he really liked my discussions regarding plan expenses, good third party administrators (TPAs), and overall fiduciary responsibility issues.

This broker was prospecting a former client of mine when I was the head attorney at a New York third party administration firm.  I was giving him some insight on issues that probably would help him get that client.

Well apparently, some of that insight helped as he got the client. The broker told me that the client was changing plan administrators, changing to a payroll provider TPA that I’m not too fond of because this payroll provider works well with this broker’s platform.

Clearly, some of my discussions didn’t rub off too well as one of my issues is any broker or financial advisor having the plan sponsor change providers, just so they could get paid easier. Whether this former client of mine ends up in a worse situation that where they were before is up for debate, but somehow some of my work led to what I think is an unfavorable result.

Sometimes, the best of intentions lead to great results and sometimes it doesn’t.

My latest JDSupra.com article can be found here.

When I was about 12, New York was the first state to implement a mandatory seat belt law. Original adherence to the law was negligible because getting people used to driving with a seat belt when they never did was tough. At the time, police could only issue a seat belt ticket if there was another reason to pull you over. Observance to the law grew over time, mainly because drivers like me (those who got licenses after 1985) were required to wear seat belts during driver education. Compliance is now about 91%, which is pretty amazing since pre-law, it was about 16%.

With the six month anniversary of plan sponsor fee disclosure under Section 408(b)(2), you will see and read a lot of claims that it’s been a failure because most plan sponsors don’t read them.

Rome wasn’t built in a day and when you have plan sponsors that were trained to look at absolutely nothing and that fees really didn’t matter, its going to take some time to understand what these disclosures are and their responsibilities concerning them. I’m sure 6 months after the seat belt law, people were claiming in New York that it was a failure.  I have said that the impact of fee disclosure will take some time, I would prescribe to belief that we need at least 3-5 years to understand its impact with plan participants, plan sponsors, and the plan providers who provide them.

My latest newsletter geared towards financial advisors can be found here.

My latest JDSupra.com article can be found here.

14 years in the retirement plan business and I have seen quite a bit. Two disasters that I witnessed close by involved the fall of a fiduciary and the disestablishment of a very successful third party administrator (TPA).

I am not trying to bring up some old sordid details. While the situations were dissimilar, one similar trait held by both providers led to their downfall: arrogance.

If there is one trait in business that can be fatal (besides stealing from your clients) is arrogance. You shouldn’t think that you’re bigger than this business and be stubborn to change. I always say the beauty of this business is that I learn something new everyday, whether it’s a change in the law or regulations, or lean about a new provider or whatever it may be. The arrogant provider is immune to the advice and has little care in changing their business model even if the industry is changing around them.

The point is that the providers who thrive in this business aren’t arrogant, they are always willing to listen to new things and willing to learn new things.

With discussions and negotiations over the financial cliff, one needs to look at the possible ramifications that it will have on retirement plans. We certainly don’t know what the final outcome will be, but as retirement plan providers, we need to be aware of what changes may take place.

Will there be a phase-out of the 401(k) salary deferral deduction for the wealthy? Will an increased tax rate have employers start to look at defined benefit plans, cash balance plans, non-qualified plans, and new comparability profit sharing plans to augment savings? Will employers just chuck their retirement plans because of the increased fee disclosures?

Your guess on retirement plan changes is as good as mine, but we have to be vigilant in identifying the changes that will be made and how it will affect our business.

As many of you know, I worked for a third party administration (TPA) for almost 5 years. I liked my co-workers, loved the work, but I didn’t love constantly fighting for a decent raise every December. The majority owner of this producing TPA was a master salesman, but his partner who acted as the COO was incompetent and just a miserable man to work for. The place seemed to have a large turnover of employees and I told my boss that happy employees never leave, only unhappy employees leave.

After taking a contractually required break from the retirement plan business (which included a Department of Labor investigation), this TPA owner has started a new financial advisory practice where independent ERISA fiduciary services are offered. I have received many calls about this development as this TPA owner and I never saw eye to eye after I left (with much thanks to his partner for that).  I even received a call from the head of a producing TPA that inherited my old TPA’s block of business and this is after this person had blown me off previously. I don’t know the purpose of the call, other than lamenting that my old boss is stealing this guy’s business. My issues with this old boss is in the past, what he’s doing has nothing to do with me because he’s not taking food out of my mouth and I loathe to get in any fight that doesn’t involve me (I wish some of my family members took that advice).

The point is that people can be incredulous that this old boss of mine is in the advisory business again, but the fact is that happy retirement plan sponsor clients never leave. As a retirement plan provider, be less concerned with what the competition is doing and be more mindful of how you treat your client.  If they want to hire a provider who left some unanswered questions about allegations made against them that really doesn’t matter because the client clearly wasn’t happy if they are getting rid of you.

Providers may tell me that they have had happy clients terminate them and I just believe that because of the difficulty in changing plan providers, no retirement plan sponsor client making a change was happy with the current provider’s work.  It may be a simplistic approach, but that’s my story and I’m sticking to it.

My latest newsletter can be found here.

My latest JDSupra.com article can be found here.