It takes a lifetime to build a sterling reputation, one that can be destroyed in an instant.
The competitive nature of the retirement plan business means you can’t afford to engage in anything that would negatively impact your practice. You owe it to yourself—and your employees—to avoid potentially devastating pitfalls.
Employee checks and balances
I once worked with a plan administrator who attempted to transfer participant assets to his own IRA.
How did he get caught?
Not by any of the firm’s policies and procedures, but by the plan custodian, and only because he got the account number wrong.
The administrator was fired, but no arrest was made because the chief operating officer was too embarrassed by the ordeal.
Employees are hard to manage. While it’s important to have a great staff, it’s also important to ferret out rogue employees. You can reduce the risk by putting policies and procedures in place that limit the exposure.
Something as simple as two approvals on any distribution request or levels of approval for certain transactions can protect assets.
Theft isn’t the only concern; employees can go rogue by committing multiple errors or behaving poorly in customer service. Again, it happens when proper policies and procedures aren’t in place. For employees who commit multiple errors, it might be a result of poor training.
Poorly performing staff can hurt the bottom line and mar your reputation in the eyes of other plan providers and sponsors.
Failing to properly vet
I’ve worked with hundreds of plan providers—either in conjunction with them, I may have been referred by them, or I might have referred business to them.
Most are rewarding relationships, but problems occasionally arise.
For instance, I replaced Matt Hutcheson as fiduciary on the one multiple employer plan from which he didn’t steal. I said some nice things before it was clear that he stole millions. I also once wrote an article used by Vantage Benefits Administrators, before they were also accused of stealing millions from their plan sponsor clients.
As a word of caution, you need to vet any plan provider with whom you work or refer business. If I had simply Googled the owner of Vantage Benefits, I would have found he was sanctioned by SEC. While my reputation appears unscathed, you might not be as lucky.
Not ‘living on the edge’
With regulations that cover retirement plans, it’s best not to provide service too close to the edge, specifically on what’s qualified and what’s not.
I’ve seen too many plan providers get too aggressive in interpreting retirement plan regs. It frequently involves the sale of insurance products in qualified plans. I’ve sometimes seen it in TPA compliance testing.
When agents from regulatory agencies come a-knockin’, it means it’s too late. It’s therefore best to work within the space allowed.
Social media is an effective way to build your practice, but a dumb social media post can sink a business.
How you deal with customers, how you deal with the competition, and how you deal with fellow plan providers on social media says a lot about you. If you handle yourself in a professional manner, you can avoid issues. If you decide social media handles are great ways to insult people or a great way to talk about incendiary political issues, you’re going to make a mistake—one that harms your business.
Your expertise, professionalism and competency should speak for you, not wild-eyed rants.
Not sensing change
For most plan providers, the biggest danger is failing to sense industry change. In Hollywood westerns, it was an ear to the ground. As a retirement plan provider, you need a similar (but not literal) approach.
Over the last 20 years, I’ve seen retirement plan providers exit the business simply because they failed to adapt. Fee disclosure is an example. Plan providers who adapted to a transparent, fully disclosed model did much better than those who waited until disclosures were implemented.
The retirement plan industry is fluid. Be ahead of the curve instead of behind, custom make your practice and keep your head out of the sand.
Ary Rosenbaum is an author and ERISA/retirement plan attorney for his firm, The Rosenbaum Law Firm P.C.
He is also the host of That 401(k) Conference, a fun and informative retirement plan conference taking place on Friday, September 20, 2019, 9:00 am – 2:00 pm at Progressive Field in Cleveland, Ohio.
Rosenbaum’s latest book, humbly titled “The Greatest 401(k) Book Sequel Ever,” is available in Kindle and paperback at Amazon.com.
Ary Rosenbaum is an author and ERISA/retirement plan attorney for his firm, The Rosenbaum Law Firm P.C.
He is also the host of That 401(k) Conference, a fun and informative retirement plan conference taking place at Dodger Stadium in Los Angeles on Friday, February 22, 2019, from 9:00 am to 2:00 pm. Special guest: Steve Garvey.
Rosenbaum’s latest book, humbly titled “The Greatest 401(k) Book Sequel Ever,” is available in Kindle and paperback at Amazon.com.
