What you really need from a retirement plan advisor
Do you have the right problem?
Dan Pink’s “To Sell is Human,” perfectly illustrates the role of the retirement plan advisor in the 21st century.
Before we get to corporate retirement plans, we can all agree that anyone can go online to find out how much the MSRP is for a certain new car without going to the dealership. Anyone can go online and research the features of a product, see the ratings by other people on Amazon, find the usual problems other people ran into with the product or service, compare prices at major retailers…and so on. We no longer live in the culture of “buyer beware,” we’re now in a culture of “seller beware!” The information is just a click away. The advantage (and knowledge) is now in the hands of the consumer.
Unless… the buyer has got the problem all wrong.
Dan Pink uses the example of assuming a new vacuum cleaner is needed because the floors aren’t clean. Ah, but maybe the vacuum is fine. Maybe it’s that you live in the city in an older house and the old window frames are letting in all the street dirt. Or maybe your HVAC system needs to be cleaned. Or maybe you shouldn’t buy a vacuum cleaner at all but join a neighborhood cooperative that shares home appliances. Maybe professional cleaning would be a better spend.
“…clarity—the capacity to help others see their situations in fresh and more revealing ways to identify problems they didn’t realize they had.”
Clarity: This is both the challenge for retirement plan-centric advisors and it’s also their value.
Anyone can spend time on the internet and learn about how a 401(k) or 403(b) plan is put together. Spend enough time and you’ll figure out at least the basics of what can be done. But what you can’t find on the internet, is what all the options are, the creative solutions, the problems that will occur if the plan goes unchecked, and the cascade of interventions it can take to right the ship once again.
Hey Courtenay - We’re going to go it alone on this one and just use the outsourced investment fiduciary because it’s cheaper. But before I let you go, [provider] is telling us that we can only auto-enroll people [this one way]. Didn’t you say there are multiple auto-enroll safe harbor plan designs?
Yes I did, and there are... but they didn’t hire me, so I said they might consult the internet or call their outsourced investment fiduciary. (And yes, I know that wasn’t nice because that outsourced investment fiduciary doesn’t provide any services except a list of funds that pass an investment screen, so they can neither call them nor get that answer.)
The problem here is that this company was growing fast and they were about to make a decision that would have exponential impact on their business and budget in 12 months. They needed participation in the plan so they didn’t fail testing. Without some really good consulting up front that looked at all the options and illustrated the possible cost and administrative scenarios, they were going to be blindsided. They decided to solve it through automatic enrollment and a safe harbor plan design, without understanding how mandatory or one-on-one education meetings could be a more cost effective way in the long run or which safe harbor plan design would be the best for their budget. They weren’t considering how the operations person would be spending their time if the plan offered monthly enrollment. They weren’t anticipating how the employees would react or their level of fiduciary liability if they offered certain investments And sadly, the providers they decided to hire can’t and won’t provide that clarity.
I’ve seen plans spiral out of control on cost when no one is paying attention and there was a business change. I’ve seen companies who designed the plan with good intentions but didn’t understand how it was out of alignment culturally or didn’t anticipate the metric ton of administrative work that was suddenly created out of a harmless checkbox.
Without the clarity, you might solve the wrong problem for your company. Hiring the right retirement plan advisor makes it easy to prevent spending company resources and time in ways that don’t match the company mission, or worse, take away from it.
In Retirement Plan Land there are many bridges that lead to the Land of Unintended Consequences. If you don’t have a retirement plan advisor, the internet may indeed lead you to a bridge too far.