Interview: Alvin Rapp, RPG Consultants

About 8 years ago, I was invited by a Manhattan stockbroker to speak at a plan sponsor event and more retirement plan providers showed up than sponsors. It’s there that I met Alvin Rapp who has a third party administration firm that offered 401(k) ETF administration when no one was offering it and no one thought it was viable (including me at that time!). Alvin is a trendsetter then and still today as fee disclosure and the fiduciary rule just make ETFs and their transparency that much more attractive as a 401(k) plan investment.

Q: Your background was in education. How did you make the transition to third party administration?
A: As I started this business as ERISA recently had become law, my entry was based on company retirement plan consulting to educate small to mid-size companies in the proper operation and administration of their plans.

Q: When did you start RPG and when did you decide to focus on ETFs?
A: I founded RPG in 1983. Let me 1st clarify that we don’t focus on ETF’s as we are not investment professionals and do not recommend or comment on any particular investment. I became aware of ETF’s in 2002 when an investment advisor who used our Company’s services for his clients approached me with a question: “I have an individual client where I use ETF’s to manage his personal investments. The client, who is a business owner, asked me why can’t I offer ETF’s in my 401k Plan?” When the financial advisor asked me that question, I 1st had to find out what an ETF wasJ. After researching that an ETF was the most transparent and cost effective way to buy an index, it led to my son and I to discussing the viability of adding a daily record keeping ETF capable platform to our services to allow investment advisors the ability to have a true open architecture array of investments to offer participants in a participant directed 401k or 403b plan with no revenue sharing and full fee transparency. You might now easily conclude that we were ahead of the DOL Disclosure rules.

Q: When you first started with ETF 401(k) plan administration, did people in the industry think you made a mistake?
A: I got push back as expected from the mutual fund and insurance company platforms that you can’t have ETF’s in a daily record keeping system. I remember in 2005 going to an ETF conference in Boston to be on a panel where one of the large mutual fund providers, after hearing my comments, vehemently declared “it can’t be done” for which I responded “but we’re doing it”. This back and forth went on a few times to the audience’s eventual laughter when I finally said “It’s not that it can’t be done; you’re just not doing it because it would be bad business for you.”

Q: How did the fee disclosure regulations effect your business with interest in ETFs?
A: As indicated above, we were already there. The key was and continues to be educating financial advisors and Plan sponsors that you can have a true open architecture platform that is ETF capable with no revenue sharing and “true” fee transparency and disclosure. The disclosure regulations, although certainly a positive in the industry, still lack true line by line fee transparency for each service provider to a Plan. Until those rules are enforced by the “spirit’ of the law as I’m sure it was intended, many industry providers are still lacking in the transparency as defined in my previous sentence.

Q: One of the criticisms about ETFs in 401(k) plans is that index mutual funds make them unnecessary. How do you respond to that?
A: 3 ways: 1) ETF’s are generally still cheaper and should be considered as an option if desired by a financial advisor and/or the Plan sponsor; 2) Managed ETF portfolios are available thru some of the custodians using our platform as well as other independent record keeping platforms; and 3) Many financial advisors that use our services create managed lifestyle portfolios, from for example very conservative to very aggressive, using ETFs for their personal clients and can also utilize them in 401k/403b plans thru our record keeping platform. This helps in the education and investment ease for company employees and plan participants and has generally boosted employee participation. On our daily record keeping platform, these portfolios can also be rebalanced either by the financial advisor or the participant. The other advantage to this approach is that there are no additional costs to the participant for these choices vs. using an ETF managed portfolio by an outside manager as described in #2.

Q: Do you believe that an advisor using actively managed funds is going the way of 8 track tapes?
A:I think that an advisor should be able to choose from all available investment offerings.

Q: What do you think the future will be for revenue sharing and proprietary funds?
A: I believe the spirit of the fee disclosure regulations doesn’t leave room for revenue sharing nor proprietary funds – both of which I feel present a conflict of interest.

Q: What do you think of payroll providers serving as TPAs?
A: Large payroll companies that act as TPA’s should not be – period – based on numerous experiences with clients who have previously used them. They might be an easy answer especially for large companies who want to take a one size fits all approach and doesn’t care (but should) about true fee transparency and revenue sharing. But for the small to mid-size market that needs and should have pro-active consulting and expertise with proper compliance and operational procedures for their company retirement plan, the payroll providers just cannot provide this level of expertise and value in these areas. For them, it’s all about collecting assets with no regard for professional services in this space.

Q. What do think of the proliferation of 3(16) administration and 3(38) fiduciaries?
A: Very positive as long as there is no conflict of interest with the provider of those services and it’s appropriate from a cost and needs perspective for the client.

Q: Where can someone find out more about RPG?
A: By calling us and/or visiting our website at

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