I am interested in understanding what to look for in a 401(k) record keeper. Particularly, I am interested in what information can i expect from the record keeper, what record keepers people have had good and bad experiences with, and what thenature of the problems have been. I want to build a practice around retirment plans; all my efforts to date have been in taxable accounts
Hi Alfred, Record keepers do come in a wide variety with varying attributes; and while some may be more expensive, they also may bring more to the table. For me, it's a 'bottom-up' approach based on client needs. Once a short-list is developed, I would recommend not making the fatal mistake of trying to mold a record keeper to your needs, which from what I hear, seldom works. Better you find which set of attributes best works for you. My own personal preference is an open architecture platform with all revenue shariing credited back to the plan and all excess revenue sharing credited back to participants' accounts; but, as I said, there are other factors to consider. Start with what you want... and work from there to see where you can have the best fit.
We developed our proprietary RFP that has over 30 pages. We have responses by 28 of largest bundled record keepers. We incorporated technology questions six years ago. About half the record keepers are losing money. That is the reason that we continue to see compression e.g Hartford exit Many proudly point to how much money they spend on technology, but if you dig deeply, you'll find most of that is for platform maintenance. Too much old technolgy has to be disguised by many of these record keepers by installing as many of their funds on the platform, and in the lineups, as possible. Think of it as mutual fund companies, posing as record keepers. Most have limited open architecture, although they tout their offerings like it is unlimited. Very few have pure open architecture because their platforms are so inefficient. The best have open architecture, revenue and expense disclosure, provide robust fiduciary support an actually make money. If you don't want to have your clients experience an involuntary conversion, do your homework. In one of our recent RFP's, the cost spread from highest to lowest expense was 400%.
This is a very complicated question. Having been a recordkeeper myself for 10+ years as part of my 20+ year career has given me a huge advantage because I understand what different firms are trying to achieve when servicing their customers and I can often spot where they are strong and where they are weak. I don't think you should look for "one vendor" because it implies that one vendor can service every client. My experience tells me that this simply isn't the case. We use a vendor neutral approach and will work with any vendor, as long as the vendor fits best what the client is trying to achieve and can service the participants in a manner supports them best and dovetails with our participant-level services. But understanding these issues and matching up vendors takes time and experience. You might be better off partnering with a firm that does RFP vendors searches and leave that to them to handle. Otherwise, you may spend a lot of your time covering service holes that the vendor doesn't support and that may consume a great deal more of your time than you expect. If you have not handled recordkeeping or plan administrative functions before, you may be taking on more than you've bargained for.
Alfred some very good suggestions from some very knowledgeable people above. We run RFPs often for providers so we have vetted quite a few. Important aspects of a good recordkeeping partner. They have the updated technology as Mike mentions a must. FLAT DOLLAR FEE PER PARTICIPANT NO ASSET BASED compensation. They have to have experience so they can be a true partner help with Plan Design and be prepared for the inevitable "situation" that will arise with all plans. Have to be Open Arch no affiliation with any MF, Insurace companies, Money Managers. Back office should also have the experiecnce not just the Senior mang. Flexible able to think outside the box. We work with great providers Alliance Benefits in Chicago and Benefit Consulting Group in NJ are two terrific partners. As for growing your Retirement Practice may I encourage you to attend our event in June at Lowe's Motor Speedway in Charlotte NC. It has some great professional who will have a lot of great advice and ideas to share. http://events.miracenter.com/
Retirement plans are a complicated issue. You should probably talk to a professional specializing in this. There are a few options for doing this: if your interest in this is in building a practice, your best bet is to join, at least in the beginning, a practice that is already doing this and learn. There are so many record keepers out there, so to try and give you a list of good & bad ones is practically impossible.