Alright, listen\u2014I\u2019m stubborn. I admit it. There are just some things I don\u2019t understand, and when I don\u2019t understand something, it sticks with me. It burrows into my brain like a woodpecker with an agenda.<\/p>\n
So I get this call. Financial advisor. Nice guy, polite. He asks about how I price my retirement plan document work\u2014specifically my flat fee. I tell him, \u201cTwo thousand bucks. That\u2019s it. That\u2019s the price.\u201d Straightforward, right?<\/p>\n
Then he hits me with this: \u201cDoes the fee change if the plan has, like, thousands of participants?\u201d<\/p>\n
What? Thousands? No! What does that have to do with anything? I mean, sure, I get the curiosity, but c\u2019mon. Drafting a plan for one guy in a cardigan or drafting one for an entire Fortune 500 army\u2014it\u2019s the same document. Same rules, same IRS pre-approved volume submitter plan. I don\u2019t suddenly type faster because there are more participants. I\u2019m not being paid by the comma.<\/p>\n
So I explain this to him. I tell him: \u201cLook, the number of participants\u2014that\u2019s a TPA issue. They\u2019ve got the sub-accounts, the statements, the whole buffet of administrative nightmares. That\u2019s where the scaling happens. Not with me.\u201d<\/p>\n
I mean, what does he think I\u2019m doing? Personalizing each plan with tiny names etched in the margins? \u201cOh, Janet from Accounts Payable is in this one. Better raise the fee!\u201d<\/p>\n
And by the way\u2014I\u2019m no TPA expert, but I\u2019ve been around. I know enough to know that the only fee that should scale with assets is the custody fee. That makes sense! Six to eight basis points, fine, because you\u2019re holding more stuff. You\u2019re the vault. You want a bigger vault? You pay a little more. That I can get behind.<\/p>\n
But here\u2019s where it gets nuts.<\/p>\n
Some of these well-known, highly regarded TPA firms\u2014they\u2019re still charging administration fees based on plan assets. Assets! Like they\u2019re investment advisors! What are we doing? That\u2019s like me saying, \u201cOh, your plan has 3,000 participants? That\u2019ll be $200,000. Because\u2026 reasons.\u201d<\/p>\n
It makes no sense! The amount of money in the plan doesn\u2019t make it more difficult to administer. It\u2019s not like the server is sweating under the weight of extra zeros. You\u2019ve got 100 participants whether it\u2019s a $10 million plan or a $100 million plan. Same statements, same calculations, same work. The decimal place just moved over.<\/p>\n
Look, I know what people are gonna say. \u201cIf the client\u2019s okay with it and it\u2019s disclosed, it\u2019s fine.\u201d Sure. But you know what else is disclosed? Airline baggage fees. And we still complain about those, don\u2019t we?<\/p>\n
Call me old-fashioned. Call me stubborn. But I believe in this crazy little thing called logic. A fee should relate to the work involved. Not some arbitrary number you pulled out of a pie chart.<\/p>\n
Anyway, that\u2019s my rant. I feel better now. Sort of.<\/p>\n
<\/span><\/p>","protected":false},"excerpt":{"rendered":" Alright, listen\u2014I\u2019m stubborn. I admit it. There are just some things I don\u2019t understand, and when I don\u2019t understand something, it sticks with me. It burrows into my brain like a woodpecker with an agenda. So I get this call. … Continue reading