The Gap
Most hard-working Americans are not saving enough for retirement and will come up short. Even with all of the focus over the past decades, most Americans don't have access to an employer sponsored retirement plan, or aren't adequately saving in their existing plan. This equates to a sizable GAP in American's retirement savings. Get ready for a dose of insightful conversations with Shannon Edwards and her expert guests as they explore innovative strategies to bridge the retirement savings gap. Whether you're an employer, benefits manager, or a financial advisor looking to excel in the retirement plan arena, listening in will help you unlock the secrets to closing The GAP and stay ahead of the future!
The Gap
How Plan Sponsors Can Run A Smart Advisor Search - Eric Dyson
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Episode Intro: The GAP with Eric Dyson
Your retirement plan advisor can be the difference between a 401(k) that simply exists and a plan that actually changes employees’ lives. We sit down with Eric Dyson, executive director of 90 North Consulting and host of Be More Than a Fiduciary, to get brutally practical about how plan sponsors can evaluate an advisor, run a meaningful advisor search, and avoid getting fooled by the best presentation in the room.
Episode Description:
We start with the fundamentals that protect you as a fiduciary under ERISA: understanding your duties, defining what you need before you hire, and setting priorities that reflect the reality of your workplace. Eric shares what strong RFPs and competitive bids look like today, including how to spot copy-and-paste answers, why case studies and sample reports matter, and how great advisors tailor solutions to your plan demographics, participant behavior, and internal bandwidth.
Then we dig into what sponsors should expect as “table stakes” from a retirement plan advisor: recurring investment reviews, a usable investment policy statement, and ongoing fee and service benchmarking. We also get specific about participant education, how to measure whether it’s working with clear KPIs and employee feedback, and why culture fit and true partnership with your recordkeeper and TPA can make or break outcomes. If you’re a small business owner, CFO, or HR lead with no committee and no benefits department, you’ll leave with a simple roadmap to find the right advisor and an annual habit that strengthens your due diligence: reviewing your 408(b)(2) fee disclosure to understand what you pay, what you get, and whether your advisor is a fiduciary.
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Guest Bio: Eric Dyson
Eric Dyson is a graduate of the United States Naval Academy. After graduation, he served for ten years as a highly decorated nuclear-trained submarine officer. Eric has been a professional in the financial services industry for over 30 years, serving ERISA plan sponsors for over 25 years. He is currently the Executive Director of 90 North Consulting, where he provides services including advisor and broker RFPs, fiduciary training, best practices audits, and adjunct committee membership. Eric is also the host of the Be More Than a Fiduciary Podcast and delivers keynotes focused on actionable lessons from ERISA litigation.
Contact Our Guest:
Eric Dyson
Executive Director
90 North Consulting
https://90northllc.com/
LinkedIn
Contact Our Host:
Shannon Edwards
President
TrisStar Pension Consulting
TriStarPension.com
LinkedIn
Welcome And Why Advisors Matter
SPEAKER_02Hello and welcome to The Gap. I want to say a special welcome to all of our first-time listeners. If you've listened to The Gap before, you may remember today's guest, Eric Dyson. I wanted to bring Eric back because this time we're going to dig into a topic that I think matters to just about every plan sponsor, regardless of the amount of assets their plan has or the number of participants. That is, how do you know if you have the right financial advisor for your retirement plan? And maybe even more importantly, how do you go about finding the right one? Eric is the executive director of 90 North Consulting, where he works with plan sponsors on advisor and record keeper searches, fiduciary best practices, fiduciary training, and governance. Eric is also the host of the podcast, Be More Than a Fiduciary. Eric brings a perspective that very few people in our industry have. He's worked for a major record keeper. He's been an ERISA plan advisor himself. And he has served as an expert witness in more than a dozen ERISA cases. Recently on Eric's podcast, Eric turned the microphone over to two of his clients to talk about an advisor search he helped their retirement plan committee conduct. What I found interesting about their conversations was that it wasn't simply about fees or finding somebody new. They talked about defining what they needed, establishing objective criteria, participant education, culture, and ultimately finding the right long-term partner for their employees. That got me thinking about the other end of the market. What if you don't have a retirement plan committee? What if you don't have a benefits department? What if you're the business owner, CFO, or HR director, and the retirement plan is just one of the 25 things sitting on your desk today? Those plans and those employees deserve a great advisor too. So today we're going to talk about what plan sponsors should expect from their retirement plan advisors, how to conduct a meaningful advisor search, and what those of us working with small and micro plans can learn from the processes being used by much larger plans. And of course, we're going to bring it back to what we talk about on the gap, how better plans, better service, and better participant outcomes can help us continue closing both the retirement savings gap and the retirement plan coverage gap. Eric, welcome back to the gap.
SPEAKER_00Well, you're setting a pretty high bar for me. So let's see if I can deliver things.
SPEAKER_02Absolutely. Absolutely. Okay.
Eric Dyson’s Path To 90 North
SPEAKER_02So for someone who missed your first visit on the gap, give us a quick version of your journey into the retirement plan world and what led you to create 90 North.
SPEAKER_00Sure. We'll we'll make that quick because I do want to get to your main topic here. I I love it and thank you for having me as a guest. So I did spend 10 years of my life driving a submarine. That has nothing to do with my journey, but just kind of a little bit. I did my financial plan with a company who recruited me to come to work for them. Seven years of basically wealth management. My journey is six years at Fidelity Investments, a little time at Gallagher, a little time at USI. And for the listener who may not recognize those names, mid-sized consulting firms, where, as Shannon mentioned, I did serve as advisor to 401k plans. Also for our 403B and 457B plan friends out there, also, you need a good advisor. So anytime I use the word 401k, we want to include you all in that conversation. Small boutique firm and brought us to the summer of 2020. What a great time to start your own consulting firm in the middle of a global pandemic, but we've been doing this for six years and here we are. And really one of the first engagements I had a client who didn't know that I left the boutique firm said, Hey, we're ready to do this advisor search. We'd like to include you. I said, Well, I'm not there anymore. And they actually hired me to run the search for them. And that's a little bit of a detail of where the search process really was born in six years ago. So we've been doing searches for six years.
SPEAKER_02That's awesome. So let's jump right in.
Pre-Search Homework And Priorities
SPEAKER_02You recently helped your clients and their committee cut conduct an advisor search. Before Plan Sponsor starts interviewing advisors, what homework should they do first?
SPEAKER_00I think there's a number of things that have to be done. And Shannon, you kind of hinted this plan was a $400 million plan, but we we, in our conversation, I hope to make this universal, right, in some of the concepts. And obviously the amount of effort will vary from the micro plan to the large plan market. So, but to answer your question, I want to start with some universal concepts here. The first place I would start is understanding your basic fiduciary duties. Okay. And we're not going to spend a ton of time on that, but four of them are you know, the duty of loyalty, that what you do is exclusively in the best interest of your employees, the plan participants, the duty of prudence, that you have a good process. And I'm going to keep it that simple for now. You have a duty to follow the plan document, which is certainly more of Shannon's expertise than mine, but I do weigh in on that a good bit. And then the duty to diversify assets. So I ask if you're searching for advisor, start with some basic education. And basic can be the Department of Labor has some great resources, understanding your fiduciary responsibilities. And you might think it's a really basic document. It is, but it will be a good place to start. Number two, as Shannon, you've already mentioned, how are you trying to impact participant outcomes? Now, I want to talk about why. So the original question is what do you need to understand when you search for an advisor? Okay. This is a little different from I will recognize the day-to-day. Well, it's a lot of work for us to implement a 401k. It's a lot of work. We don't understand it. Our HR person is new and has never touched the 401k. Those are all issues to absolutely be addressed. And I'm not setting those aside, but you need to focus on how are we trying to serve the employees. And then the third part that I want to do is wrap wrap up your answer to that question, Shannon. Is what are the priorities, right? Shannon, you mentioned on my podcast, we were very, very good. And when I say we, I try to do this for all my advisor searches, right? What's important to you? What are your priorities? Is it the fiduciary governance? That's normally pretty high on folks' lists, all right? Is it is it investment research capabilities? Well, that sounds important, but you know, there are a lot of good advisors out there who do a pretty good job at that. And I'm not saying to set aside, but in summary, what are your priorities? And Shannon, I found more and more the two biggest priorities in all of my searches that make a difference. Okay. So the fiduciary part's important, but most good advisors can deliver on that, meaning it's not going to make a difference. They might be a little difference. Are how are you going to help our employees and how are you going to help us in HR and benefits to save time and understand this? Okay. So I've probably articulated that in a way that your listeners, especially in the small plan market, have used different words and different ways around this. Well, we don't have time. We're not experiencing that. That's how the advisor can help you if you set that as a priority to help us work with our compliance items. So that last thing to condense me throwing up on you in a lot of warmarks are what are our priorities and start with that. Okay.
SPEAKER_02So it sounds like they need to start with what do we need rather than who should we hire?
SPEAKER_00Absolutely. What do we need? And because you can't figure out, I mean, think about when you're hiring an employee. You know, you're going to hire for different skill sets, different personality. And it would be the same if you're hiring any service provider, right? What do we need? Is this person going to fit that bill? A little bit of a sidebar here, Shannon. I'm working very hard on LinkedIn, and I would encourage any of the listeners to connect and look to my newsletters, but I'm on a series of eight signature principles of thoughtful fiduciary leadership. And number one, and it's number one for a reason, is to define the problem before you come up with a solution. So it's exactly what you said there, Shannon. We we can't start looking until we know what we need.
SPEAKER_02Awesome.
When It’s Time To Go To Market
SPEAKER_02And how does a plan sponsor know when it's actually time to go to market? And does something have to be wrong?
SPEAKER_00So let's go to the basics on this. Deal guidance is for all of your service providers, you are supposed to periodically, okay, and that's the word, periodically evaluate your service providers, right? And and in a different document, actually, it's under understanding your fiduciary responsibilities, they list everything that you should look at. So obviously, if something's wrong, it's time to go to market. But I I will also quote Fidelity Investments, and I'm not here to call out different service providers, but this is a publication that Fidelity makes available, their plan sponsor attitude survey. All right. And roughly a third of all plans that they surveyed, and also note it was not just Fidelity clients, a third of the plans that they surveyed are doing an advisor search. And that's a larger percentage than the ones that are not satisfied with their advisor. Okay. There's a buzz phrase in our industry of every three to five years. Well, where did that come from? And that came from the initial proposed 408B2 regulations. And for the listener who's a little new to some of our alphabet soup, that's your disclosures from your service providers. But the DOL assumed that that was the interval and it's kind of stuck. Does that mean, ladies and gentlemen listeners, you have to do it every three to five years? No, but it's kind of the standard. All right. Maybe you've done benchmarks, maybe you've just done an evaluation. So, Shannon, the original question, when should you go to market? The default answer by the DOL is periodically. But let's just think of things like technology. And let's take your record keepers, for example. AI has done a tremendous amount. Whether you like the term AI or it scares you, or you've embraced it, but record keepers' ability to engage with your employees and your participants at all plant sizes is moving at the speed of light with AI. So you may be very happy with your service provider. There could be a different one that can do just a better job. And maybe that results in your service provider not making a change, but having them adapt and meet your needs just a little better.
SPEAKER_02Yeah. So have you ever had it where like benchmarking the current advisor actually confirmed that the sponsor already had the right partner?
SPEAKER_00Typically, when it's a benchmark, they are overwhelmingly satisfied, you know, very happy with their advisor. I've never had a case where they made a change. All right. And my process is, I don't want to say significantly abbreviated, but in respect to these other firms that are going to bid, right? I don't put them through the ringer with a ton of questions, right? Sometimes there's a tweak in fees, sometimes there's a request. But I want to go to a middle ground, Shannon, if I could and answer that question. I've had clients do an RFP because they felt they needed to for their due diligence. They were otherwise satisfied. And they got an eye-opener as part of the process. And there were vendor changes, right? There were partner changes because they did what was right and they found out there was a different and better world out there.
SPEAKER_02Uh yeah. Yeah.
RFPs That Reveal Real Capability
SPEAKER_02Um, once this search begins, what separates a great retirement plan advisor from someone who simply gives a great presentation?
SPEAKER_00That's a great point. And the best way I can answer that is when the questions and response come in in the RFP, and maybe I need to back up one step. RFPs these days, depending on the size of a plan, can be lots and lots of questions, lots and lots of pages, a lot to work through, a lot to read through, right? And there have to be these table stakes questions. You know, have you ever had a compliance issue in the past three to five years? And those go without saying. But to answer the question, how do we find a good advisor, not just by what they put in the RFP? Well, you have to start with the right questions for your RFP. Like based on what you made your priorities, your RFP question set has to reflect that, right? And I've seen a lot of RFPs that are clearly downloading of a question set off the internet. I'll give credit to people that at least do an RFP, right? But that's typically not going to serve you. And Shannon, the answer to the question is how do they back the answers to the RFP response? Okay. Now, some advisors will do it with a lot of words, all right. But what I like to see is how have they backed this with maybe uh attachments, sample reports. What I really like to see is case studies, right? We had another, and not just the RFP, but maybe even the interview standpoint, we have another client similar to yours, and here's what we did for them. All right. What I have seen that hits it out of the park is when the advisor responds, not with their experience with other clients, which is great that they do that, but then here's how we would see that for you. We see your plan, your employees, your demographic as such. And this is what we think we would do. Oh, by the way, we need to spend a little more time getting to know you, and this might change. But when it's an RFP or Shannon, let me go back to your point about micro market or small plan marketing. It may not be a formal RFP, right? It might just be collecting a handful of proposals. So, ladies and gentlemen, the listener, anytime you use the word RFP, let's let's just say competitive bid, when you're collecting responses, one, is it personalized for your needs? Or is it clearly a copy and paste? And and when they're proposing solutions that meet your needs, that's very important. So here's a little bit of a conundrum in this search process. An advisor who's really on their game, what they're going to do is say, hey, we need to get to know you better, and we need to come up with a solution that fits you. Unfortunately, for the committees, the HR professionals, the plan sponsor, that doesn't really tell them very much, right? We don't know you as the advisor any better. So go back to where we started. What were your priorities? Okay, if education for your employees is a priority, and they say the advisor says, Well, we need to get to know you and what you'd like to see. Do you want one-on-one? Do you want virtual? Do you want in person? You, the employer, the HR professional, needs to ask, Well, based on what you know today, what would that look like? So Shannon, I think it's the more personalized that response becomes, the better they get to know is it gonna be a good relationship or not.
SPEAKER_02Yeah, for sure. So I want to make this really practical.
What Great Advisors Deliver Today
SPEAKER_02What services should a plan sponsor expect from a good retirement plan advisor today?
SPEAKER_00So I'm gonna go back to where we started. You, the plan sponsor, the employer, need to understand those basic fiduciary responsibilities. Okay. Number one, how are you gonna help us with our duty of prudence? How are you gonna help us with our duty of loyalty? Okay. And and I'd build this metaphor of building a house, right? If you were to hire somebody to build your house for you, you would want to know that the foundation is solid. Now, if you were not building and you were buying, when you walk up to the house, the first thing you look at is not the foundation, and you don't say, hey, I need the you know, foundation survey done first. No, that's not the first thing you look at because it's not the day-to-day things, but you need to get a good feel for how the advisor is going to take care of your fiduciary responsibilities. Okay. And that's mostly process the duty of prudence, right? Then it's really moving on to what we've already discussed. How are you going to help us with employee outcomes? So, as an example, Shannon, maybe we can get very specific. An advisor that's qualified, maybe not the best out there, would take your reports from the third-party administrator or take the reports from the record keeper and just put those in a different slide deck and do nothing more than show the client, hey, here's what's going on. Now, perhaps that does help the client with their fiduciary responsibilities, right? So don't let me minimize an advisor who helps you with that. But the advisor who is helping you look at data and understand what you need to do, that's what you're looking for. So let me give a specific example. Most advisors will look at, hey, what's your average deferral rate in your participant base, right? What is your average account balance? Those are things that you can get in data that anybody can do. Okay. A good advisor might do something a little different and say, hey, you know, we looked at a little more data, and you've got an issue with loans in your plan, right? Loans are going up. You have more than your average, and we need to do some education on what the loan process is. We need to find out maybe why your participants are taking loans. Again, it will personalize things for the plan sponsor.
SPEAKER_02Yeah, I and that's a great idea and a great point to make. Those the advisors that do dig a little bit deeper on the analytics that are available to them. We've sat in on some of those meetings too, where we talk about those plans with like low participation rates and what do we do from plan design that could get those participation rates up or encourage participation? Tell me, is there any service that you consider a non-negotiable? Like
Non-Negotiables Like IPS And Benchmarks
SPEAKER_02if the advisor doesn't provide this service or these services, really a plan sponsor should think twice about hiring them.
SPEAKER_00Yes, it's going to be obviously a periodic fund review for any reasonable size plan that should be quarterly. Semi-annual is fine, but in no case should it be less strictly than annual. Okay. Have to be doing an investment review. Have to assist with an investment policy statement. All right. Just to be clear, the Department of Labor does not require an investment policy statement, but need to have one. Okay. The advisor needs to be willing to do a benchmark of services. Okay. And you need to ask the advisor how are they going to help you to benchmark themselves? All right. Now, I'm not suggesting there's a widespread conspiracy in advisors benchmarking themselves. There are third-party tools, okay. I have been hired to do benchmarks where the plan decides, hey, we want somebody other than the advisor benchmarking themselves. But in general, the non-negotiable is there have to be periodic benchmarks. Okay. And another question I would ask is I wouldn't call it a non-negotiable, Shannon, but pretty close. Ask the advisor how they can help you, the employer, to monitor them, the advisor. Okay. Because you have that duty. And I've seen some really, really good advisors. They produce a checklist. They say, look, these are the questions we think you should ask us on a periodic basis. So not a non-negotiable, but pretty darn close. And then this would not necessarily be a non-negotiable, because there are some companies out there that hire an ERISA advisor just to do those things. In other words, they're not as interested in providing education to their workforce, to their employees. And they just want the advisor to do the fiduciary piece. So let's take, you said, what is non-negotiable? So if a company decides they don't need that, and in this day and age, that's getting fewer and fewer, less and less companies that don't want education. But if you want education, you have to ask how the advisor is providing that. Now that's the one that's a little more, I'll use the term nebulous, that some include that as part of an overall package. We will do that for a core price. Some, it's an add-on service. And what the fiduciary investment reviews look like, yes, they're different, but they're more similar than when we start talking about employee education, that the landscape there can vary dramatically. So just for an example, let's say you are a smaller plan and you have an advisor that specializes in those types of plans. He or she may have another team that does financial planning. And if that's what you want, you can make that a non negotiable. Or it might be an advisor that does not do financial planning. They assume that it's a conflict of interest. These days it's typically not considered that way, but. My point being, if you need education and you feel that your employees need that, I think they do. All right. But if you feel you need that, it's a non-negotiable.
Participant Education That Fits Your Workforce
SPEAKER_02And that was going to be kind of that kind of leads me to my next question because participant education came up in your conversation on the podcast with your clients. And so how much weight should sponsors put on what an advisor will actually do for their employees?
SPEAKER_00Well, great question. And let me tell you how that in that particular podcast, and you all will be able to find out who that is if you search, but I'm going to keep it confidential for this podcast, not name the client, but uh you should be able to find it. We had three finalist presentations. And and going back to it sounds like I'm digressing, but I know the question is about education. Okay. And I had to make two very, very difficult phone calls because all three of them were just spectacular in the way they presented. Okay. But one advisor was, in everybody's mind, clearly the best on the fiduciary piece. And their education was adequate. And the other organization was going to deliver the most for education, but their fiduciary piece was a little lower. And the one that they ended up hiring just seemed to bring the best of both worlds. Okay. So Shannon, I'm kind of dodging your question a little bit, right? And I don't mean to dodge it, but this was an item that this plan, this client of mine, they outlined exactly what they wanted, what they needed. Okay. So I want you to picture, you know, an organization that has people walking onto a manufacturing floor and don't sit at a computer all day and don't have access to maybe some of the record keepers' fancy, you know, brain chart presentations or, you know, things to walk through. So that one really is about setting goals and determining what each plan specifically needs.
SPEAKER_02And okay, so talking about education and what you're doing for the employees or what the advisor is doing for the employees, and whether this is, you know, a really large plan or even these small plans, how can they evaluate whether an education program is really working instead of simply just checking a box?
Measuring Education With Goals And Feedback
SPEAKER_00Um that that's a great question. It's a bit of a challenge. And the reason I say it's a bit of a challenge is it takes time to get the employees to buy into the trust. Okay. So it starts with there has to be a dual message from whether it's education from the record keeper or from the advisor, right? They have to be able to reach out and start delivering a message. The employer, the plan sponsor, has to deliver a similar message, but it's going to take, in my mind, 12 to 18 months to get that up to where you think it needs to be. Okay. And I would set some goals, whether and and let's say it's a situation where you're going to do one-on-one meetings and the advisor is willing to do one-on-one meetings. Okay. If you have a workforce of let's just pick a number of 200, and you decide that, you know, having 25% of our workforce do a one-on-one is the goal, and you say, hey, we'd like to see 50 people do one-on-ones. I'm walking down this road, Shannon, to say, how do we know if they're doing a good job? Well, that 50, that that 51-on-one number is kind of random. Right. And what if that's not the right number? But I think it's important to establish some key performance indicators. So in addition to one-on-ones, there's all always group meetings. Okay. One of the things that I love to see is when committees, and again, I know in the small and microplan space, you may not have a big committee. It might be two people. Okay.
SPEAKER_02The owner and his wife, right?
SPEAKER_00Oh, right. Oh, a CEO and HR, right? And let's just say whatever it is, it is those two people. So let me start where I said, what I like to see is when a committee allows members from the workforce to be part of the committee. Now they may not be voting members, they may not be participating in the decision, but they are the voice of the workforce. Okay. So now let's return to this smaller company, which it's two people. And let me use your example, Shannon, an owner and a spouse, right? We're essentially the same person. I mean, it's almost like saying we have one person. It is important. How do we know if it's working? It's important for you to reach out to your employees, find their perception. How is this going? What could we be doing better? So I want to use kind of three points that you need to have some patience. Okay. You need to set some goals and get feedback from the employees as to how they feel, whether it's working or not.
SPEAKER_02I think that's a great idea. I have never, you know, I don't know why I haven't thought about that, but I've never even heard that said. But that is a great idea for a small employer, even like for TriStar for me to just reach out to our team and say, you know, how do you feel about our 401k plan? So I think that's a fantastic idea. I want to talk about it.
SPEAKER_00Can I add one more thing that goes across everything we've talked about so far? You know, what makes a good advisor? I wouldn't say it's non-negotiable, but how's it working? But what we're all kind of used to and seeing is these quarterly committee meetings, all right? What I've seen in the most successful relationships, and and I think this is still smaller plans as well. It's important that the advisor and the and the benefits professional, not the entire committee, they have regular meetings that are not full committee meetings. Okay. For a you know, mid-size to larger plan, what I typically see, and this can vary, is that there's those quarterly committee meetings, but there's also at least a monthly meeting with the advisor and the benefits team. And sometimes the record keepers included. Certainly, you know, Shannon, if you have a TPA and you want to include all parties in those off-cycle committee meetings, that is key to hitting a lot of the points we've already talked about so far.
SPEAKER_02Yeah, no, I agree. We actually, one of our favorite plans to work with one of our best clients, honestly, is we meet once a month with everybody. So the TPA, the record keeper, and the committee have a monthly touch base. And it may only be, and the financial advisor is definitely included, but it may be a 15-minute meeting or it may be an hour-long meeting, depending upon what all we have to talk about. But it is at least monthly just to check in and say, hey, how's everybody doing?
SPEAKER_00So and for those that are worth, you know, remember it, you know, and I recognize you have some new listeners and people that are new to the 401k, 403B, 457 world, but how many meetings do you have over secure 2.0? You laugh, but how many were, right? And the committee didn't want you didn't want to spend half an hour in every committee meeting discussing secure 2.0. It's a great example of why to do those off-cycle meetings.
SPEAKER_02Yeah, that's so true. That and that after cares, too. So I think cares, secure, secure 2.0s, tons of meetings over a few years. So anyway.
Reasonable Fees Without A Race Down
SPEAKER_02Um, I want to talk about fees now. How do you determine whether an advisor's fee is reasonable without automatically turning the search into who's cheapest? Because that's not what it's about. It doesn't have to be about who's cheapest.
SPEAKER_00Uh you're right. And the most accurate way to do that, and I almost said efficient. This is not necessarily the most efficient way, is going back to Shannon, what you said. How often should someone shut the marketplace? Okay. That gets you the best result, right? Because now it's a competitive situation, right? Obviously, you're not going to do that every year. And if you love, love, love your advisor. Maybe you don't really do that formally, you, but you do need to do a competitive bit, okay? Benchmarking is a very, very effective tool. And remember, I said earlier that having the advisor benchmark their own service, it's okay, but just be careful with that. Most third-party tools, assuming your advisor has any level of integrity, can only manipulate that so much. And I'm not suggesting the advisors are out there doing that. But go back and what I said is ask, you know, the advisor how can they help you to monitor them, but get a benchmark. Okay. But Shannon, I want to highlight, I want to go back again to that fidelity survey that I mentioned, give them credit for the data. But a new version out, and I just included a couple of their slides from that. We said, hey, we're not just going for the lowest fees, but something new this year was a grid of four plans. Did services increase? Did services stay the same, or did services go down from the advisor? And the other axis was did fees go up? Did fees stay the same? Did fees go down? And it was about a third of all plans had an increase in fees for their advisor. Now, as you can imagine, it was a minuscule amount of plans that said we had lower services than increase fees, all right? Probably those are the ones that went out to bid. But for the employers, I think you all would recognize, at least the large majority, that you're willing to pay for additional services. Okay. And advisors, you need to get to the point that you're mature enough to not be embarrassed or not be shy or not try to hide behind that and lower your fees. In fact, maybe not, you know, Shannon, I know this is a focus on what the employer should be looking for, but but I've told advisors you need to benchmark your fees well enough that if you deserve a pay raise, you're not afraid to ask for it. All right. So let's let me give an example. Let's say it's a plan that's $10 million, and the advisor is not charging an asset day fee, but charging a flat fee. And the client is doing great. In fact, the client acquires two other companies, and now this $10 million plan is all of a sudden a $50 million plan. And the flat fee is based on $10 million and a third the number of participants, right? So there's got to be a process. And I would say I like to see it annually to evaluate that. Okay. And listeners, I'm not telling you exactly how to evaluate that, but step number one is understanding how much you are paying. And I would venture to guess that many of you have lost sight of that. And I'm not accusing you of being negligent, but it's if you do it once a year, you know how much you're paying and what you're getting for it. So, Shannon, even short of a benchmark, that's uh a good point. And here's something I can tell you all when it comes to litigation, and my experience with litigation, and again, most of you listeners are smaller, then you have to worry about litigation, but the Department of Labor does come knocking on people's doors. So I'm not here to scare you. But if you know exactly how much you're paying and you know exactly what you're getting, and you've compared that to what it's outside the marketplace. So you know what you're paying, know what you're getting, and you've compared it. You've done anything anybody could ask you to do.
SPEAKER_02Yeah. And that's what that was going to be my next question is what should sponsors be looking at when they're comparing price to services and value and trying to determine if they're paying a fair price for the value that they're getting and the service that they're getting.
SPEAKER_00Well, one thing to do in general is, and and but be careful what you hear me say, and I'll be specific, is planned sponsors, you need to stay current in what's available in the marketplace. Okay. So lifetime income solutions, managed account services, right? We now have target date funds that you can default your employees into them, which we've been doing for years, but can also default them into an income solution. Okay. So, so the question, Shannon, is hey, how how do we, you know, compare? First of all, make sure you're getting educated. Just because you get educated doesn't mean you necessarily have to adopt that. But ask both your advisor, ask someone like Shannon, you know, third-party administrator, service providers, right? Your ERISA attorneys, your record keepers, you know, figure out resources you can find out to find out what is available. Okay. If you love your advisor and there's a service that you need that they just don't provide and you don't know about it, there's a little bit of a gap. You know, you like how I worked out in there, the gap.
SPEAKER_02I do, I do. Thank you. In your recent conversation, there was a lot of emphasis put on culture and fit. So,
Culture Fit And Partnership Red Flags
SPEAKER_02how do you objectively evaluate something that feels subjective?
SPEAKER_00It's more subjective. I'm gonna say, Shannon, there is the objective and the subjective part, okay? And and the way we do the culture fit, the way 90 North does this for all of our searches, is I start out with the personality and the culture fit. Okay. And let me tell you the worst case scenario is the worst case scenario is the plant sponsor and the advisor go through this long process. They answer this long RFP, they get numbers, they get a proposal, they get things in paper. And then the first time you meet face to face with the advisor is in your office, in your conference room for a one-hour finals presentation, and everybody walks away, and a few people say, Yeah, we we just we don't think we like them. That was a waste of everybody's time. And and think about, I want everybody to think about whether it's employees, any of your service providers, whether it's, you know, someone that's doing your IT security, right? Your firewall, your cybersecurity, and whatever all the service providers you have in your business, you probably have one that's competent, but when they're showing up at your office, you just roll your eyes and go, oh my gosh, you know, we have to have this meeting. And trust me, some of you out there, your service providers are thinking that about you. But you want you want somebody who you want to engage with. You want somebody that's enjoyable to do business with.
SPEAKER_01Yeah.
SPEAKER_00And then, but sometimes the culture is it can be really that, hey, everybody that was brought to the table had tons of experience, but they were a little more mature. Okay. And it can be literally just an age issue with our workforce is younger, and we'd like to see an advisor that has a younger education force, right? You need a good personality fit. Okay. It's not the end of the world, but Shannon, you said, how do we do it objectively? I don't know that it's objective. I think it is purely, you know, how what your gut feel is. Will we we enjoy work working with this team? And from my standpoint, there are enough good quality choice of advisor firms out there that we can limit it to the ones that would do a good job. Maybe, Shannon, for you now, let's go down to the micro market and maybe somebody's coming to you for the first time, right? And they need somebody that's right there in Edmund or Oklahoma City, you can still work that to a to a degree, but maybe not as great. So culture fit, I think, is pretty big.
SPEAKER_02Yeah, I no, I agree because if you're if your team, if your staff, if your employees are not going to trust the advisor, then the outcomes are not going to be successful for those employees. Because honestly, a financial advisor to me is one of the most important partners that we have. And that's why we have one on every single client is because I I think that I had a client today ask me, they they found me on the internet. They they want to start a 401k plan. They had me come meet with them at the office because they want somebody local. And the first thing that they asked me when we were talking about the different pieces of the 401k, well, do we have to have a financial advisor? And I said, absolutely you have to have a financial advisor. I am not a financial advisor. I do not do that work. And you absolutely have to have one. They are just integral to the whole thing being successful.
SPEAKER_00So um and she oh, I'm sorry, go ahead. No, go ahead. Go ahead. I want to insert here. It's a resource I make available. I'm not, you know, this is not a shameless plug, but I had a record keeper ask me a number of years ago, to your point, they says we still have a lot of plans without advisors. And this was more the record keeper, you know, from the company level, this was one individual with the record keeper asked me to write a white paper. And I still have it, I'm pretty proud of it. Does your plan need a financial advisor? And I list all the considerations, all right, of if you don't have one, why you should have one. Okay. Now, you know, if Shannon, if you require all your clients, I think that's great. Just to be clear, and I put it on my white paper, the Department of Labor does not require it. But just lately, if y'all are familiar, the listeners with recent proposed guidance from the Department of Labor, they don't say that you have to have one, but they have example after example after example about using a qualified advisor as part of your plan. So if you want to reach out to me on LinkedIn or contact information for anybody, I'd be happy to provide that white paper to you. And Shannon, I'll make sure that you get it as well as a full.
SPEAKER_02Absolutely. Absolutely. That'd be great.
Small Plans: Where To Start
SPEAKER_02Um, okay, so I want to tell I want to take everything we've been discussing and we're gonna shriek it. So I've got clients, basically the majority of my clients are under 100 lives. So no committee, no benefits department, no RFP consultant. Where should that plan sponsor start? You know, or like the people who found me on the internet and called me and had me come over and talk to them. Where should they start looking for a financial advisor and being able to, you know, compare advisors? I know normally when somebody doesn't have an advisor and they want to work with us, then we'll give them three or four names and have them interview them and talk to them and you know, try to find that good fit, et cetera. But in your mind, where should they start?
SPEAKER_00Shannon, you've already given the best answer, right? To to go to a trusted source. And I've had this happen, right? Where somebody is recommended to me and want to be careful. I would say this. I don't want to sound too hoity-toity, but I just know they don't want to engage in my entire process and really what my cost is. And I'll just say, here's four excellent advisors, you know, in your area that would serve you well, and I would recommend you talk to them. So maybe it's someone like Shannon, third-party administrator. I'd be happy to, you know, if someone emails me or reaches out and that's all you want to do, I'd be happy to provide that. But you have business contacts as well, right? I've been hired to do searches because previous clients were asked by, you know, someone who was their equivalent peers. CFO says to CFO, hey, we need to do this. Who are you using? All right. So in the HR and the benefits world, you know folks. So if you're a member of a local SHERM chapter, talk to your peers and then try that one of two sources. I I don't necessarily say you want to do a LinkedIn search is fine, right? But you're just getting you're gonna get the person who has the best looking LinkedIn profile. But I think, Shannon, I could have given this a very short answer, just as you said. Find a trusted source and say, where should I start? Who a reputable and can do this?
SPEAKER_02Yeah, that's good advice. What are three or four questions um every small plan sponsor should ask a prospective financial advisor?
SPEAKER_00Wow. Now you're catching me off guard for a little bit. Um I would just ask, what does a typical committee meeting look like? What's the cadence? What's the agenda? Okay. And I'm shooting from the hips on this one a little bit. And I'd ask, first of all, I'd ask them how many plans they've had. I've done RFPs, and as simple and silly as that sounds, I've done RFPs where the client recommended a certain advisor to me based on previous experience. And I've come back to the client and say, you know, they were really nice and I'm sure had a great experience, but I don't think they have the book of business that you really need. So I'm not here to kill that business, but if you come across an advisor that is primarily a wealth manager, right? And they do a great job at that, but one of their clients was a CFO at a small business, and this advisor has one plan, and that particular CFO recommends to you, oh, go see my friend, you know, Sheila or Fred, whoever this advisor is, ask how many plans they have. What does their book of business look like? Okay. And it could be the flip side of that equation, right? If you're a startup plan or if you're a one or a two million dollar plan, you'll probably find out pretty quickly that if an advisor doesn't do anything under $100 million, right? You want to ask them, how many plans do you have our size? Another quick question to ask, and I don't mean anything either way by this one. Some advisors out there will have a minimum fee. Okay. And if they're very good at what they do, they probably do have a minimum fee. And just for the listener, that can be $10,000 a year. All right. Uh, if that's within you, there's a difference between budget and you know, value, but advisors who are charging that minimum, they're probably bringing you that much value. Whereas some who are specializing in a small plan market will do that. So I'd ask, you know, how many plans do you have our size, right? How many plans do you have? Period. Do you have a minimum fee? And then I would ask two more questions. What can you give us for education? And then the other one, which might be a little, I don't want to say nebulous out of your element for the listener is how are you doing investment reviews? Okay. And if they don't have a quick answer like a platform that they use, you know, we use FI360 or we use RPAG, or, you know, we have our own proprietary system. If they are stumbling around how they do quarterly investment reviews, I'd ask them for a sample of that. So you caught me off guard a little bit with that, Shannon, but hopefully I came up with some good questions.
SPEAKER_02Those are those are all great ideas, and I agree with them completely. Those are all really good ideas.
Simple Governance That Still Protects
SPEAKER_02What can a small and what can small and microplan fiduciaries borrow from the governance practices of large retirement plan committees without making the process unnecessarily complicated for them?
SPEAKER_00You you know, Shannon, you mentioned, hey, some of these smaller plans don't have a committee. Okay. I I think, you know, the governance process, formalize it as much as you can. So you said, and you brought it up, it does not have to be complicated, okay?
SPEAKER_01Right.
SPEAKER_00And I can tell you a client I had a number of years ago, 10 employees, one committee member, the CEO, and I met twice a year. And he took minutes. Now, minutes where he wrote an email to himself, copy to file. Okay. And I would say the biggest thing is, and and I mentioned this in my newsletter series on LinkedIn, okay. And again, not a shameless plug because I'm just trying to offer information, is but one of the signature of my eight principles is uh to tell the fiduciary story, okay? And people ask over and over for me, what should meeting minutes look like? Okay. And if you're meeting, kind of Shannon, we said, well, maybe there's not a formal committee, maybe you're just meeting. I I would, you know, somehow say at least document the meeting, okay? And and the story, whether we call it meeting minutes or not, should demonstrate. Remember, I went back to you need to understand the four basic principles. Your documentation should demonstrate prudence, it should demonstrate a good process, and it should demonstrate loyalty why you are doing it. Okay. So telling the fiduciary story is one of the principles. And I told you principle number one is to define the problem before a solution. I think here's to summarize all over the place they're saying is signature principle number two is prudence is about process, loyalty is about purpose. And you want to document the process you use and how it benefited your employees. So prudence is about process, loyalty is about purpose. And those would be the things I'd say borrow that from larger plans, and you'll be in very, very good shape.
SPEAKER_02That's great advice. What can advisors serving um the small to micro market, what can they borrow from their large plan counterparts? Like what are the what's a couple of the best things that those advisors serving the really large plans are doing that the advisors that service the smaller plans can borrow from them?
SPEAKER_00I think the answer to that, Shannon, is there's a good balance between scale and customization, right? I mentioned earlier in your RFP responses or employers when you're getting from advisors, hey, how are they customizing this to you? Okay. But the advisors, in my opinion, that service the small plan market very well have a system that applies to most all of their clients. Okay. So where there could be exception, let's say if you've got a relatively small company, but still uses union employees, okay? We might want to set that outside. And that's a great example where you have to lean on a really good third-party administrator for plan document issues, et cetera, et cetera. But these smaller plan advisors, when I say not smaller is the advisors, but when they're servicing smaller plans, they have a good scalable system, right? That investment reviews look pretty much the same for all the clients. The way they deliver education is pretty much the same. So as an example, and I I do want to stress this as an example, okay? I know of a firm that in each quarter, they would have three different investment review meetings, and the clients would attend as a group, right? So it was not necessarily customer, but they would say, hey, here's the 14 funds in the lineup. This fund is on watch, and and it would be the same lineup for all of these clients. Now, for the smaller plan market, you know, oh, wait a minute, Eric, you said customization. Well, a plan lineup really is not going to vary that much. So I'm kind of going on and on with examples here that those advisors servers in the small plan market have a very good standardized model that you, the employers, the plan sponsors, probably 98% of the time you're going to fit in that.
SPEAKER_02Yeah.
SPEAKER_00And Shannon, let me let me just throw, it's my turn to interview you, right?
SPEAKER_02Okay. Absolutely.
SPEAKER_00When you think of your clients and write the plan document and how you do compliance and help with the 5,500, would you agree with me? And if I'm wrong, go ahead and say that. No, we've got 40% are different. Would do most of them fit in a very similar model?
SPEAKER_02Most of them do fit in a very similar model. I mean, for instance, we have different things that we choose for every plan about like in service distributions at 59 and a half. Different things or, you know, normal retirement age is 65. So there are things that we and now if they want to change that, we will let them. But nine times out of 10, most of the plan documents are set up the same way for a lot of the choices, other than when we start talking eligibility and years of service and things like that. Those are very customizable. But you're right, a lot of the options are the same. And and the way we set up all of our processes and procedures for all of our clients and the way they flow through our workflow every year, that is all the same for every client. So even the large client to small client.
SPEAKER_00But when it comes, you're right, and and plan document issues, you're right. But but you're using a same, the same document, just checking different boxes. Yep. Right? Whether are we going to allow loans or not? I still consider that to fall within that category. They are falling within the same process. Yeah.
SPEAKER_02Yep. Absolutely. Absolutely. And what's the biggest mistake you see plan sponsors make when selecting or evaluating an advisor?
SPEAKER_00Uh
Biggest Sponsor Mistakes And Best Advisors
SPEAKER_00the biggest mistake is not necessarily the most common mistake, is they just go with the person that somebody knows. And they may or may not be qualified to be a 401k plan advisor. Okay. And the other is I I would say the other biggest mistake is just deciding it's too hard, so we're going to go without an advisor. Well, honestly, I think that's ridiculous like not having one.
SPEAKER_02That is, yeah. I I want to flip the question. What are the best advisors doing today that you wish more advisors would do? Um, so like what would be something that advisors are doing that would make you say that's an advisor I want in one of my searches?
SPEAKER_00I I would say it I'm gonna give an assumption first that the fiduciary process is in place. Okay. So if if when you say the best advisors, if they don't have the fiduciary process in place, that's investments, helping them understand their basics, they shouldn't even be doing this business. Okay. What I see the best advisors doing is something we've already mentioned, is how are they focusing on employee outcomes and how are they helping the benefit professionals with their day-to-day struggles? So, as an example, this is not to cast dispersions at payroll companies or record keepers or TPAs, but data is where things get a little messy in 401k plans and again, 403Bs, 457 plans. Okay. The advisors that can help benefits just with those things in general, the biggest demand I hear, we're right in that time of year where benefit professionals want help with the audit. Okay. So it's advisors that go past the investments, go past the education, and help the company with their overall, I mean, everything's involved in running the benefit plan. That's the most successful ones I see.
SPEAKER_02Yeah, awesome. And I I will say we obviously appreciate the financial advisors that work with us hand in hand and partner with us versus those that maybe try to shut us out of the meeting. Does that make sense? Or work around us? Because we want to work with all of our financial advisors as partners in helping the benefits professional at the client's office, helping take that load off of them, right? So um, yeah.
SPEAKER_00Let me let me add on. No, let me add on to that. And I would say for the employer, it's a little bit of a red flag if your advisor is flexing their muscles by trying to show you how they're gonna put your providers in place and they're gonna take charge, right? If it doesn't feel like a partnership, I'd be a little concerned there. I I've only had a handful of times throughout my entire career where I've had, and typically they were, you know, a group phone call meeting. This is before we didn't zoom and everything, but there were a handful of times that the service provider really ticked me off in the middle of a call. And I didn't throw them under the bus in the middle of the call. I just said, hey, you know what, everybody, we need to take a break. Let's revisit this. I I did not read in the riot act in front of my clients. Now I typically picked up the phone after and chewed them out. And and I didn't, and probably in very few rare occasions, I would go back to the client and say, hey, we got a real issue here. Because if that's the fact, that's a fact. But but you bring up a good point, Shannon, because of your earlier question, what are signs of you know, ones that are taking good care of clients? They partner with partners. It's it's an important aspect of our business.
SPEAKER_02Yeah, it is. And that's and we try to be good partners to all of our partners, right? So we there has to be a mutual respect there. Um, and that's how we treat all of our financial advisors and all of our record-keeping partners as well. So I think you're right. I think if you notice that there's not a partnership happening, then there's a problem. So it could be a red flag.
Making Plans Less Intimidating For Owners
SPEAKER_02We talk obviously on this show about closing the coverage gap and encouraging more small businesses to offer retirement plans. What do you think advisors can do to make offering and maintaining a plan feel less intimidating to a small business owner?
SPEAKER_00Shannon, I want to go back to it's still something I said earlier. There are advisors out there who specialize in the small plan market, okay? And they have a system in place. Okay. And what I mean by system, it's it's probably better that I say a process, okay?
SPEAKER_01Right.
SPEAKER_00Now you probably know a couple, and I don't know who they are, you probably know a couple that are very, very good in that small plan market, and you suggest that. Now, just kind of want to call it a word of caution to to the listener, but in closing that coverage gap, if you've decided you've got to have M Power as your record keeper, or you've got to have Fidelity, or Shannon's got to be your TPA, you know, tri star. They may fall out the out outside of that, but but there are advisors. They're just specializing in that market. And I'm being a little vague on an answer, it's not really specialized, but I think it's back to what we said. Find the ones who do specialize in that uh market size.
SPEAKER_02Yeah, and I would add this, because we uh we do work with a lot of advisors that are newer to the 401k market. And as you and I both know, we need more advisors servicing retirement plans, especially if there's really going to be 300,000 new plans by you know 2030. So we need more advisors working in the 401k market. It's hard to get advisors to work in the 401k market, especially the small plan market. So we do have advisors that maybe don't have as many plans, but we work really hard to be a good partner to them and to train them on how to service 401k plans better or to put them in touch with people like you who do education for advisors on how to be a good 401k advisor and things like that. So we also try to partner with them as far as training them up on how to do a good job if they're not already, if they don't already have those processes in place, which I think has been really helpful. We do a lot of hand holding, I'll say that.
SPEAKER_00Okay. So yeah. We need some more education resources in our business. So I know that what you're doing in your role at uh ASPPA and Plan Sponsor Council of America, there are some great education resources out there to the listeners. I will give my shameless plug. I do have 90 North University.
SPEAKER_02No, I think it's great. We need it. Yeah.
SPEAKER_00Very much designed for you, the committee members, right? Advisors will get information out of it, but most of it is very, very basic information, how to evaluate a target date fund. And that's written from the committee level. So if you'd like to check that out, I'd love for you to do it.
SPEAKER_02Um, if a plan sponsor, if a plan sponsor finishes this episode and does just one thing differently when evaluating their advisor, what do you hope it is?
One Annual Habit That Changes Everything
SPEAKER_00Assuming they have if they don't have an advisor, really, really consider. Come to you, whether they're your client or not, and uh ask, hey, get me some resources. Who should I consider? Who should I talk to? Okay. And if you're a listener and not Shannon's client, another record, go ask somebody as a minimum. Okay. As far as evaluating what you have with your current advisor, I would say it's as simple as getting a copy of the fee disclosures, asking your advisor to walk you through the fee disclosure and understand exactly how much they're getting paid. Many times in the small plan market, that's an asset-based fee, right? It's specified as a percentage of your plan assets, which means you have to do some math. Okay. Is that $2,500 a year? Is it $25,000 a year? Is it $50? You need to understand how much you are paying that advisor. And then the same fee disclosure is required to list the services they are providing. And so then you can evaluate is that advisor actually delivering on those services? And then, oh, by the way, a mistake that many people make, just advisors or record keepers in the matter, that fee disclosure should also specify whether that individual or that organization is serving as a fiduciary. So, Shannon, I here it is. If you don't have an advisor, look into getting one. If you do have an advisor, get a copy of the fee disclosure, have the advisor provide it, review it with the advisor. How much are they getting paid? What are the services they're provided? Are they a fiduciary or are they not a fiduciary? That's the one thing you should be doing on an annual basis.
SPEAKER_02That is excellent advice. Eric, thank you so much for being here today and helping us, you know, kind of bring some of those great practices that you've talked about on your podcast down to the smaller plan level. And to
Wrap Up And Where To Connect
SPEAKER_02my audience, thank you for listening. All of Eric's contact information will be in the show notes, including a link so that you can also listen to his podcast and follow it as well. I listen to it every week, and it is full of a lot of great information. So, Eric, thank you again. And I hope to see you back here soon on a Jenny.
SPEAKER_00You're a big deal in this business. So I'm on, I'm not just saying this. I'm honored that you asked me to be your guest and thank you for allowing me to do this.
SPEAKER_02Well, thank you. I appreciate it. Have a great night.
SPEAKER_00Thank you.
SPEAKER_02Bye.
