What Level of Service Does Your Client Need?
Bundled vs unbundled. I am often asked, what is the proper answer for your client and what are the differences? In full disclosure, I have sold both service models over my career. For many years I worked for large insurance companies as a wholesaler, and we often pushed the company line and sold bundled services. From a sales standpoint, bundled initially seemed like a good way to maintain control of the assets, keep home office people employed and have the company look favorable on me. What is interesting is that with all of the companies I worked for (4) the bundled service model eventually became too poor to use and as salespeople we had to look for expertise outside the company. One of the largest companies I worked for (Fortune 100) only sold plans with assets of $750mil+. Their final solution became to disband the internal administrative services and buy a TPA, but private label it as part of the insurance company, but let it operate autonomously. In other words, it was a TPA without letting customers know, so it appeared bundled.
What my years of experience have taught me about bundled vs. unbundled is this:
Bundled appears to be easier because it is one company. Never mind, the administrative functions are a different business unit, in a different building, with a different phone number, with different people. How is that different than calling a TPA?
Staff at a TPA are dedicated to their career in retirement plans. Their credentials and longevity reflect that. Bundled providers have staff that come from other departments, need to learn retirement plans, decide they don’t like the work and post to another job within the company.
Pricing for bundled providers is typically reflected in basis points in the investment product (free). That means as assets grow, the cost for admin services increases exponentially. TPAs price fees for service.
At RPCSI (TPA) our goal is to be part of your HR Department. You have a dedicated Consultant that knows your plan, your company and most importantly the person who is responsible for the retirement plan and their needs. Not an 800# to call for the “Team”.
I often say a TPA is like a CPA for your retirement plan. Companies would not let a bookkeeper have the final say in the financial accounting for a company’s annual report. They have a CPA audit the bookkeeper’s work. Why would you let the people that handle the day-to-day operations of your 401(k) audit themselves? That is why you hire a second set of professional eyes (TPA) to audit the 401(k).
If you want TRUE 3(16) services (not 3(16) light) you will want to hire an independent TPA.
Lastly, plans have issues along the way. Knowing fixes, correction options, and work arounds only come from true professionals like a TPA. A plan in the box with no options does not lend itself well to acceptable fixes.
Being a fiduciary for millions of dollars in a retirement plan that is established for the benefit of the employees is a daunting task. With all of the changes and increasing complexity, your client needs professional partners around them that are there to help and guide them. For that there is no substitute for a TPA.