A long-time client of a financial advisor had a 401(k) plan sponsor that was quiet, easy to deal with, and, most importantly, loyal. Everything seemed smooth until the advisor’s new employee came on board. The new hire saw the plan and thought it was the perfect time to make their mark. Acting as the 3(38) fiduciary, they completely overhauled the fund lineup.
Now, let’s be clear, that was within their rights. As a 3(38), you have discretion over the investments. The problem? The plan sponsor didn’t appreciate the change. Instead of seeing it as proactive management, they saw it as disruptive. The end result: the advisor lost a long-term client.
The Fragile Balance
Sometimes working with plan sponsors is a lot like walking on eggshells. One small misstep—or even something you thought was the “right” step, can cause a crack that ends the relationship.
I know that feeling all too well. Growing up at home, I had to walk on eggshells constantly. The smallest changes in tone, the smallest perceived mistake, could lead to outsized consequences. With plan sponsors, it’s eerily similar. Even if you’re doing your job correctly, even if you’re following fiduciary standards to the letter, you can still get fired.
The Lesson
I’m not saying you shouldn’t do your job. You absolutely should. Fiduciary responsibility is not optional. But there’s a difference between doing your job and being tone-deaf to the client’s perspective.
Plan sponsors want stability. They want reassurance. And they don’t want surprises. If you’re going to make major changes, like revamping an entire fund lineup, you’d better be prepared to communicate why, when, and how it benefits them. Dropping it on them like a ton of bricks is rarely going to end well.
The Bottom Line
Advisors, TPAs, and other providers need to remember that relationships with plan sponsors are as much about trust as they are about technical expertise. You can be right and still lose the client. You can be prudent and still get fired.
That’s the uncomfortable reality of our business. Do your job, but don’t forget the human side. Communicate. Educate. And above all, respect the fact that, to a plan sponsor, change can feel like chaos.
Sometimes, keeping the eggshells intact is just as important as the fiduciary duty itself.
