Many larger third party administration (TPAs) firms, especially those owned by insurance companies are feeling the heat and they’ve been feeling the heat of competition ever since everyone had to fully disclose fees thanks to fee disclosure regulation.
So many of these providers are pushing services offered by other providers especially in the §3(21) and 3(38) space of financial advisory firms. Everyone knows how much I like ERISA §3(21) and 3(38) fiduciaries, but I find a problem with this push. These TPA firms tend to only push the service of one provider and I’m all for choice for the plan sponsor to select the provider they’re most comfortable with.
The TPAs think they’re adding something special to their service, but I think they’re adding a headache because in my mind, slowly pushing the service of another provider may unwittingly make the TPA a fiduciary no matter how much they may disclaim in the contract with their plan sponsors. The TPA by wedding themselves to just one fiduciary provider partner, they are marrying themselves to a provider that may cost them clients if they don’t do a credible job.
I like choice and anytime a client ask me for a referral, I give them at least 3 choices so that they can make a decision on their own. I recommend TPAs to offer fiduciary services from more than one advisory firm. Nobody asked me, but my opinion is out there.