Plan provider changes should be for the right reasons

Everyone has an opinion, but I think the independent opinion that is guided by beliefs and not by pay is far more important than the opinion that is greased by greed.

I had lunch with my local neighborhood third-party administrator (TPA) and we were talking about the business of retirement plans.

He told me that a recent client bolted to a payroll provider TPA (not the big 2, but another smaller one. Yes there are others) to save $600 in administration fees.

The client was told to move to the payroll provider TPA by their accountant because of the $600 savings. What I forgot to mention is that the accountant is the new broker of record for the plan. The accountant is wearing two hats. I own lots of hats (I love fitted Major League Baseball hats), but I only have one hat to pay.

What the accountant and the new payroll provider TPA failed to mention is that they were each netting over $10,000 for this change. Of course, the client wasn’t thrilled when the old TPA told them the “good news”.

The lesson here is that if you’re a plan sponsor and you get a recommendation by one of your providers to change the advisor, make sure it’s for the right reason and not for the recommending provider to get some pecuniary gain. There are many good reasons why plan sponsors should make a plan provider change, a windfall for your financial advisor and a new TPA isn’t one of them.

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