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They can’t see it, since they caused it

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A few years back, I had the worst call with a prospective client in the 19 years I have been an ERISA attorney.

This 401(k) plan sponsor was like many prospective clients, poor participation and paying too much in fees. The plan sponsor was using a reputable provider, but a provider that would be a better fit for plans 10 times their size. Client was paying $100 or so a head plus what looked like an additional 3% in an asset based fee. Clearly, this wass a plan that was paying way too much.

Why the call was such a disaster was because the person on the call was the one who designed the program with this expensive provider and he basically stated that he had absolutely no interest in changing providers.

Funny, the call with the interested advisor who was also on the line was not concerned with changing the third party administrator at the time because you can always have the discussion with the current provider about reducing fees.

I am provider neutral, heck if the current third party administrator is charging a decent fee and doing a good job, I have no issue with that.

So why was this underling in the human resources office so serious? Well, if he designed the program and we had issues with its cost or poor fund lineup or poor participation, he was obviously going to take any criticism as an attack. While plan fiduciaries don’t necessarily have to change their providers, they certainly have a fiduciary duty to check whether the fees being charged are reasonable or not.

I know what I know in life, but if I made a technology decision or a financial decision that an expert may question or offer suggestions for it, I’m not going to take offense. But then again, I’m my own boss.

So if we are a plan provider or a plan sponsor’s decision maker, we should understand that sometimes people are so resistant to change or just considering so constructive criticism, because they get defensive as if there job depends on it and maybe it does. That is why we should always consider who we contact about looking at their plan and doing a review.

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