Meet Bill and Pete, both financial advisors who serve business owners and manage several employer-sponsored retirement plans. Over the years, the two advisors have developed far different styles when it comes to selecting providers for 401(k) plans.
Bill always presents his clients with a bundled arrangement, with a recordkeeper to provide both the design and administration of the 401(k) plan. After all, the upfront fees associated with a bundled solution tend to be lower than with an unbundled solution. He also feels that having one single provider is easier and simpler for the client.
Pete, on the other hand, understands the importance of having the expertise of a third party administrator (TPA) on his team. His preferred TPA, Pinnacle Plan Design, has saved employers money either by reducing required employer contributions for the staff or by avoiding potentially costly plan qualification issues down the road. Plus, Pinnacle Plan Design has identified plan design options that allow the business owners to contribute significantly more retirement dollars. Pete differentiates himself by presenting his clients with an unbundled arrangement, with Pinnacle Plan Design as the TPA.
A New 401(k) Opportunity
Bundled Bill and Pinnacle Pete were both presented with an opportunity to bid on the same 401(k) plan. Naturally, the two advisors approached the plan management very differently.
Bundled Bill’s Approach
Bundled Bill entered the client meeting and presented a recordkeeping platform, complete with a line-up of funds and investment education materials for employees. Impressed thus far, the employer then inquired about the design of her 401(k) plan. Bill shared that the recordkeeper provides these services. Since the assets will already be with the recordkeeper, they can provide plan administration at a lower cost. Bill states that the plan administration is simple and the recordkeeper manages thousands of plans. Plus, Bill knows plan design well and he’s already chosen the features for the plan.
Pinnacle Pete’s Approach
Pinnacle Pete entered the client meeting with a Pinnacle Plan Design representative by his side. Just like Bundled Bill, Pete also had a line-up of funds and investment education materials for employees. However, when the employer asked Pete about the design of their plan, Pete was prepared! Pete and his teammate from Pinnacle Plan Design unveiled a custom plan design proposal that Pinnacle created for the business owner, free of charge. Pinnacle Plan Design asked several detailed questions about the business and learned that the business owner also had ownership interests in other businesses and wanted to include those employees. In addition, the business owner wanted to include his spouse and maximize the potential contributions for retirement. The discussion was positive and Pinnacle Plan Design offered a well-designed plan that meets the goals of the business, while providing a valuable benefit to the employees.
Decision Time – Pinnacle Pete Closes the Deal
When it came time for the employer to decide which advisor to select, the choice was clear. The owner hired Pinnacle Pete, knowing that he and Pinnacle Plan Design would take great care of the company’s retirement plan. Pinnacle Pete listened and brought valued partners who clearly were looking out for the best interests of the owner and the business. Now that Pete is aware of the other business entity owned by his new client, he is working on the investments for that business as well.
Summary – How Pinnacle Pete Outshined Bundled Bill
|Bundled Bill’s Bundled Arrangement||Pinnacle Pete’s Unbundled Arrangement|
|Generic, canned plan design that missed owner’s goals and opportunities.||Creative plan design to maximize opportunities and minimize obligations.|
|No proposal package and design analysis to show contributions.||Free proposal provided, illustrating permissible retirement contributions.|
|No TPA presence in meeting with client to ensure all considerations have been made and to identify the business owner’s goals.||With Pinnacle Plan Design present at the client meeting, Pete offered a strong team and greater service, which increased his chances of closing the business.|
|Caution: Bundled providers may overlook potential red flags during the implementation process, resulting in plan qualification issues and costly fixes.||Pinnacle Plan Design analyzes the business and its demographics to identify any potential red flags, pit falls or gaps, and works to rectify the issues before implementation to avoid costly plan qualification issues down the road.|
|Caution: If the owner and/or employees are unhappy with the recordkeeping platform, Bill has to replace both parties. Bill puts his reputation at risk.||Pete, Pinnacle Plan Design and the business owner work together to support the retirement plan. Pete can replace a poorly performing partner and still maintain a solid relationship with the owner.|