Today I was reflecting on a meeting I recently had with a prospect—an auto dealership with a nearly $20 million 401(k) plan and a few hundred employees.
I had met with their new CFO who was trying to wrap her mind around the benefits package and was seeking an advisor about the 401(k) plan. During my conversation with her, I learned her company’s own advisory firm hadn’t contacted her once since she started six months ago. At most, the firm visits the owner of the company (not the employees) to review the investments in the 401(k) plan. The firm had been working with her company for five years, and only half the employees at the company were participating in the plan.
To me, that shows her company’s advisory firm was reactive, not proactive.
After looking into it, we also discovered that her advisors were earning $53,000—she almost fell off her chair when she learned that, and I don’t blame her.
I decided to share with her our service model. For example, we do quarterly investment monitoring, not yearly. We also work together with HR directors to create educational and motivational campaigns to improve participation in the plan. We take on a fiduciary role, which means that we have skin in the game right alongside the client. We put all our services in writing, and we invite our clients to fire us if we do not deliver on the promises we made.
What’s more is that we offer all our services for half the pay that their current advisory firm charged—she almost fell off her chair again when she heard that.
She seemed really excited about the prospect of bringing us on board with her company instead of her current advisors, so she went to speak with the owner.
I was surprised to hear a few days later that her company’s owner felt strongly about keeping things the way they were. After a little research, I determined that the advisory firm was handling the wealth management account for the owner. There was a strong personal relationship between them, and that’s ultimately why the owner retained them. The firm was charging twice our rate but was also underperforming in their duties, given that only half the employees at the company were participating in the plan.
Suffice to say, we were both bewildered by this decision. The owner of a company has the fiduciary duty to do what’s in the best interest of the employees, but obviously this particular owner was choosing to maintain a personally beneficial relationship with the firm rather than doing what’s right for the employees.
The point is that if you are a plan sponsor and you feel that your current advisory firm may be over-charging or under-performing, or has a completely reactive service model, I can help.
I have a database benchmarking tool that uses national survey information to help evaluate what a typical retirement plan advisor should be charging. I’d be happy to run that analysis for you to let you know if your current firm is charging you a reasonable fee for the services they offer.
If you’re interested in learning more about our services, visit https://www.retirementcfo.com. And if you’d like to see a new and improved 401(k) plan solution that is a real game-changer in the industry, check out http://www.selectretirementplans.com. You’ll find that we have a unique approach to plan management.
Hopefully, this gave you some food for thought. If you have any other questions, feel free to reach out to me. I aspire to be your retirement CFO.