The Rosenbaum Law Firm P.C. Blog

My latest JDSupra.com article can be found here.

I had the #1 most read article on JDSupra.com, as well as #12. Here is the list. Thanks to all my readers.

I wrote an article about the selling of fiduciary guarantees and how that was a deceptive practice in my mind because plan sponsors assume that this guarantee protects them a lot more than in the very limited circumstances that it actually does.

Someone I know who works for one of these fiduciary guarantee pushing  providers didn’t take too kindly to my article and asked me to take his name off of my newsletter subscriber lists and he indicated that in the past, he referred a lot of work to ERISA attorneys. I got the picture and of course in the years that I knew him, I never got any legal work from that relationship. Regardless, when you are outspoken as I am about fee disclosure and some of the abuses in the retirement plan business, this is the price you have to pay for being outspoken. Most of the time, my outspokenness gets me more business like the time I was hired by a West Coast registered investment advisor because the competition (the top ERISA attorney in the country, in my opinion) was returning the client’s phone calls from a meeting with a bundled provider client that was known for its poor product and high fees. The client knew that they didn’t want to hire an ERISA attorney who represented providers like that. In the end, you can’t be everything for everybody.

As a plan provider, you have to develop your niche and market yourself to the marketplace you want to work with. A financial advisor, who only wants to work with $100 million plans, isn’t going to join a small business networking group. A third party administrator (TPA) that only handles small, balance forward retirement plans  isn’t going to handle a $75 million, participant directed 401(k) plan.

Plan providers need to their strengths and weaknesses. I worked for a provider with an owner who though we could do everything and when we tried to handle something out of our element, we’d flop. As Dirty Harry said in Magnum Force:  “A good man always knows his limitations.” Plan providers need to market their strengths and not try to be a provider for every type of plan coming down the pike.

The fact is that the retirement plan business is large enough for providers of all different sizes and shapes. There is enough area for the bundled provider and unbundled provider, as well as brokers and registered investment advisors. To me, it’s all about fit. For some plans, bundled providers may be the solution and there are times when they are the completely wrong answer. Plan sponsors need to find the right team, the team with the background to handle a plan of their size and shape.

Plan providers need to understand they can’t be everything for everybody. Just like I won’t be representing any companies pushing those fiduciary warranties.

My latest newsletter can be found here.

My latest JDSupra artcile can be found here.

I always talk about how plan sponsors need to work with experienced financial advisors, third party administration (TPA) firms, and ERISA attorneys on their plan needs.

Like with reasonable fees, I believe that the term “experienced” is vague. Experience doesn’t just mean years of service as a service provider. Years of experience is just one measure of retirement plan experience. Retirement plan experience could be number of plans that a provider is currently working on or even something as performing good practices in an industry where not many providers do that. So I was kind of taken back when a financial advisor I assumed that I said experience means years because this advisor (who has made a name for himself as being excellent) protested that he had 3 ½ years experience and his commitment to his clients in doing the right thing was better than what many with 35 years experience as a financial advisor who put their needs ahead of the client. I told him that he was preaching to the choir because I’ve been there and done that.

I worked at a law firm for 2 ½ years. You had some law firm partners who were excellent and then you had some that you knew that either fell through the cracks or more likely, were “juiced in” because a senior partner took their fancy. At one point, our firm had about 5 ERISA partners. All of these partners were from the multiemployer world (union Taft Hartley plans), which is a different creature from the single employer world. I bet none of these attorneys knew what revenue sharing was or how a single employer 401(k) plan because one of these partners was our 401(k) plan’s trustee and he never bothered to hire a financial advisor or review investments with the other two trustees or have participants in the plan get investment education that only increased the law firm’s fiduciary liability as a plan sponsor. So if you sponsor a 401(k) plan, would you hire one of these ERISA attorneys? At another firm, I once worked for one of the best ERISA attorneys in the country (in the multiemployer world) and didn’t know what revenue sharing was an why plan sponsors need to be concerned about administrative costs.

The same can be said of financial advisors. A financial advisor may have a billion dollars or management or have been in the business for 30+ years, but it’s irrelevant if they don’t have more than one retirement plan on their books. Even if they have a load of retirement plans on their books, it doesn’t mean anything if they don’t help their clients with an investment policy statement or giving education to participants in participant directed 401(k) plans.

Same with TPAs. Some can’t handle daily valued 401(k) plans, some can’t handle defined benefit plans, and some can’t handle any retirement plan outside of the box like new comparability form of allocation.

The point is that levels of experience may vary and it’s important to find the retirement plan provider with the right experience. It has to be the right fit for the plan based on the plan’s size and type. How do you that?  Nothing beats word of mouth and asking the potential retirement plan provider the right questions, especially if they have the experience to handle your type of plan.

My comments in a really good SmartMoney.com article can be found here.

Another great event at Westbury Manor in Westbury, NY. Great event for plan sponsors, CPAs, HR directors, etc. Please click here.

My latest JDSupra.com article can be found here.

A webinar that I did in conjunction with RPG Consultants can be found here.