Tom Zgainer is annoying the heck out many retirement plan providers, and he’s absolutely fine with it. He regularly drops into social media discussions and appears on cable news networks to decry what he sees as unnecessarily high fees still foisted on participants, even with all the regulation and litigation of the past few years.
Usually with some sort of visual aid in tow, the founder and CEO of America’s Best 401k passionately, almost surgically, illustrates the difference (and damage) hidden plan fees make.
So, with Jerry Schlichter’s courtroom shenanigans, the advent of “zero fee” funds and a greater awareness of plan costs overall, is he satisfied with where the industry is headed?
Not even close.
“What we continue to see is that while everything is changing, nothing is changing,” Zgainer says. “Technology changes, artificial intelligence is available, blockchain and all of these things are coming into play. And yet the typical plan sponsor we speak with, as a general rule, considers their 401k plan to simply be a ‘check-the-box’ item. I don’t believe the message is getting through.”
It’s why, when he’s able to actually “get through,” it’s good for the plan, and good for Zgainer, as America’s Best 401k is about to surpass 2,000 clients. Not bad for a firm that started from scratch six years ago, but there’s still a lot of work to be done.
He claims close to 5,000 plan participants send fee disclosure information to the firm each month, wanting help from its free “fee checker” program hosted on its website.
“When we simply ask for a copy of their fee disclosure in order to review a plan, more than half ask us where to find it. It’s 2019. Fee disclosure rules came out in 2012, and they’re still asking that question.
“The 401k is our primary investment vehicle for our future,” Zgainer adds, the aforementioned zeal rising, “and it seems like there’s all this noise and knowledge around that, but I don’t think it’s getting through.”
A recent cable news appearance illustrated the problem, as the host, off the air, plainly admitted he doesn’t understand his 401(k).
“And remember, it’s a financial-oriented show. He said he doesn’t understand the fees. He puts enough in to get the employer match but doesn’t know if he should be putting in more. He said, ‘I don’t know anything about my 401k. Can you help?’ So, I think we’re still wandering in the desert.”
When asked about financial wellness and whether it’s effective, the exasperation continues.
“Financial wellness ties to all this chatter about how new legislation is going to make it easier for small businesses to have 401k plans. Here’s my viewpoint—it’s really easy to get a 401(k) plan now. There’s a lot of solid, low-cost providers where the admin fees are not egregious in any way, shape or form. That doesn’t need to be invented, it’s already here.”
The problem, he adds, is that the business owner often hasn’t concluded that they personally need to start saving for their own retirement, and as a result are holding their employees “hostage.”
“A phrase I use is that our current self is the only one that can be expected to plan to help sustain the resources for our future self. You’re the only one to be counted on. If you haven’t come to that conclusion to start retirement planning for you because of everything else that’s going on in the business, then you’re dismissing the employees who are helping grow the business. So, I don’t know that government legislation is going to make it easier until that group of people says, “Yeah, I want to start saving for me.’ If the employer is unwilling to take care of his or her own financial wellness, then their employees are not going to get well either.”
Thankfully, he lightens the conversation by offering solutions, and begins with what he tells advisors when asked how America’s Best 401k grew so far, so fast.
“If somebody reaches out and asks you for a proposal or a plan review, don’t say it’ll take one to two weeks to get back to them. That’s often because the advisor is going through the inside sales desk. We talk to a lot of people who say, ‘Wow, you had everything we needed in 15 minutes.’ If someone’s asking you for something, get it to them.”
Second, he says, don’t go in with big words and “sound like you know so much more.”
“I may have sung this song fifteen thousand times. But when I speak to the client, I’m presuming it’s the first time they’ve heard it. They have to understand the lyrics and their message. We work with a lot of doctors and dentists who have a little sliver of their day to talk 401(k). They might be seeing us in between patients. The language must be spot-on in finding out what their objectives and needs are and not a bunch of yakking and superfluous brochures with colored pages. How is this going to fundamentally change their life (different than what I have now) and how will it change the outcome for retirement for their employees? That’s what they want to know.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
