The first time I heard the word Schnorrer, I was 7 years old and my parents took me on a trip to Mystic, Connecticut. During those days, the Connecticut Turnpike had eight toll booths from Greenwich to Mystic. It felt that every 10 miles, some toll collector was looking for a quarter. So my mother said, Connecticut is a bunch of schnorrers.

Schnorrer is a Yiddish term meaning "beggar" or "sponger". The English usage of the word denotes a sly chiseler who will get money out of another any way he can, often through an air of entitlement. For me, a Schnorrer is essentially a cheapskate.

When it comes to retirement plans, a retirement plan sponsor or a retirement plan provider shouldn't be a schnorrer.

A retirement plan sponsor who is a schnorrer is one who selects the lowest cost third party administration (TPA) like a payroll provider and doesn't care that the administration of their plan is done properly or not. Plan costs should always be a consideration, but so should proper administration is a greater consideration.

For retirement plan providers who are schnorrers, I can remember a certain TPA. As a producing TPA with its own RIA practice, they had clients around the country. They charged a nice and healthy advisory fee and then the managing director of the firm who ran the day to day operation started charging for travel expenses for the client relationship managers to visit clients in assisting them with the fiduciary process. That went over like a led zeppelin. I worked for a law firm partner who had clients around the country and he was insistent that he would never charge his clients for his travel time because he felt that the client would simply want to hire counsel than was more local than to pay him for traveling.

Clients don't want to be chiseled. They would rather pay a higher flat fee that getting inundated by petty charges.

One of the things I hated most about law firms was their chiseling of clients. It was enough that clients were charged by the hour, which only led to possible abuses of overbilling because law firms stress billable hours more than quality of service. So it's not enough to overcharge clients for legal services, but the law firms that I was associated with also charged clients for typical office charges like FedEx or copies. When I buy a bagel with olive cream cheese at my favorite bagel store, do they charge me for napkins or a plastic knife? There is a cost for any business to do business, but does a law firm have to pass every nickel in costs to their client.

That is why my practice uses a flat fee; clients should have a fee that they have cost certainty over and with the knowledge that I am not chiseling them. When I drafted a plan document for a client yesterday for $2,000, I didn't charge them the $8 to mail the plans or the $18 to bind the plans at Staples (my clients would tell me not to be schnorrer and buy a binding machine).

Every retirement plan provider needs to be fully compensated for the work they do. There are costs involved in doing business, but clients don't need to see every charge added and itemized because you don't want to be labeled a schnorrer.