Why a TPA Can Be a 401(k) Financial Advisor's Best Friend.

Any good retirement plan financial advisor understands and will tell you that relationships in the retirement plan business mean everything. The relationships that an advisor can have with their clients and other retirement plan professionals are the most important things and everything else is secondary. One of the most important relationships that a financial advisor can develop to augment their practice to current and future clients is finding a few third party administrators (TPAs) to work with. In many ways, the TPA's can be the financial advisor's best friend and this article will show you why.

Advisors need to look beyond the 401(k).

Your clients can do better than a 401(k) if they can afford it.

Too often brokers and financial advisors think about their client's retirement plan needs and only think about the 401(k) plan. It's understandable based on their lack of understanding retirement plan basics, but it's not when there are a vast selection of retirement plan consultants and ERISA attorneys who can help advise the client and the financial advisor.

A 401(k) plan is an attractive savings vehicle for plan participants and if done correctly, a great employee benefit. However, there are a few plan designs such as new comparability and safe harbor design that can help augment the retirement savings of highly compensated employees. In addition, there are other plans that can be added to a 401(k) plan that can certainly add a lot more firepower to retirement savings like a cash balance plan, a defined benefit plan, or in many cases, a non-qualified deferred compensation plan.

Too often, plan advisors just don't look beyond the 401(k) plan. This is more so when the advisor is using a bundled or payroll provider as the plan's third party administration (TPA) firm.  Bundled or payroll provider TPA tend to be more mechanized about retirement plans, so I find they are the last ones who will try new plan designs or bring the option of adding another plan. Unbundled TPAs tend not be boxed into the 401(k) plans, so I find that they think outside of the box more often.

Last week, I met a financial advisor with a law firm client asking whether they could do better than the typical insurance based platform 401(k). Based on the law firm's demographics, a cash balance plan could be a great option and this broker would never have thought about anything other than a 401(k) plan if he hadn't talked to me. Based on the way he acted with how much more money I told him the partners could save for retirement, you thought I found a hidden treasure. Needless to say, I made a new friend.

401(k) plans are great plans if done correctly, but there is no reason that a plan sponsor should stop there if their pocketbooks can afford more.

Giving other Plan Provider referrals isn't about lining your pockets.

When you effectively start selling referrals for your own financial gain, the clients lose.

The retirement plan industry is very close knit. Everyone knows who does great work and the few that don't. Word travels fast about the good, the bad, and the ugly in this business.

Whether you are a financial advisor, third party administrator (TPA), an ERISA attorney, or another plan provider; chances are you will have to work with other providers. You will meet other plan providers one way or another and one thing you have to realize is that these other plan providers are there to network with and they can be great help in growing your practice.

Too often, I would meet other plan providers (9 times out of 10, they were brokers) and their question is whether I can get them clients. I'm sorry, I'm in the business of getting clients and most of the time, other financial advisors refer these clients and you can't stay in business very long as an ERISA attorney if you are costing business for the folks that referred you. In addition, I get very few plan sponsors clients directly that have no financial advisor and I'm really not in the business of steering business to particular advisors. If a plan sponsor who needs a financial advisor contacts me, I would present a handful of names of advisors in their area to contact and let the decision rest in the hands of the plan sponsor. Most of the time it works and there was one time it didn't, when my law firm selected an advisor I didn't recommend. 5 years later, I'm still pissed off.

When it comes to helping plan sponsors get a TPA, again, I always like to give recommendations on a handful of firms to consider because it's ultimately a plan sponsor decision and I never want to be suspected of greasing the selection in favor of one provider.

Yet, that happens a lot in this business. Plan providers pushing plan sponsors to specific other providers just because that provider change is helping the advisor who made the recommendation.

I once asked why financial advisors steer so many plans to the payroll providers and the answer was that because the payroll provider TPA was very generous in referring new clients to those financial advisors who steered business to them. Heck, there are plans that are a good fit for a payroll provider TPA, but should they be picked as the TPA just because the advisor gets to wet his beak (Don Fanucci rules) by referrals by the payroll provider.

Transparency is an important part of this business so that I stay clear of making a provider choice for the plan sponsor. I never want to be accused of steering a plan sponsor to one provider because I do plan documents for them or because I got some business from that TPA or advisor.

Plan providers should seek out relationships with other providers and the help they can provide you isn't particular new clients, but it can be with information to get a better chance at getting that new client or keeping that current one. There is more to life than just getting clients, it's more important that your clients gets the best possible providers for their plan and not because it benefits you in the short term.

If losing clients, Plan Providers should look within.

Stop making excuses, and start looking at yourself.

The best way to keep clients is to look at what you're doing as a plan provider and what is out there in the marketplace.

If you are a third party administrator (TPA) and the competition is having much success offering ERISA �3(16) administration, you might have to offer it yourself or allow a third party offer it (cheap plug here for my Austin 3(16) service).

If you are a broker and you have registered investment advisors touting their fiduciary status or a �3(21) or 3(38) service, it might be a good idea to partner up with Mesirow or a friend of mine, James Holland from Millennium.

The worst thing you can do is scoff at what is out there. Saying a �3(38) service is just marketing is missing the point and just attacking the service because you are losing clients to providers that offer isn't going to get those clients back in the door.

It's so easy to attack others, but you need to look within if you are losing clients to the competition.

Don't be a deer in the headlights and don't be like my old Managing Attorney and just think your way is the right way and that you're better than everyone else. Happy clients never leave. Satisfied clients never leave. If you are losing clients, look at what you're doing or not doing.