Deliberate and Transparent, a case study


“Experience without theory is blind, but theory without experience is mere intellectual play.” –Immanuel Kant

“Time is the most valuable thing a man can spend.” –Theophrastus


As a wholesaler, I heard most financial advisors tell me that they didn’t work in the qualified plan business because it was a lot of work for not a lot of money. Most of them ran screaming from start up plans for that exact reason. They viewed the plan with traditional soft dollar arrangements as a time waster unless the business owner was a close friend or client.

Recently, I was able to show an advisor how to structure a plan so that it was worthwhile for them while controlling costs in the long term for the client.

The advisor did a great job of working with the client to understand their needs. The client had a SIMPLE plan but the principals of the company and most of the participants didn’t understand what it was. When it came to retirement plans, all they knew was 401k from media coverage. The advisor took the time to educate the plan fiduciaries about the differences; the pros and cons of both types of plans. He then took a considerable amount of time to understand what the plan sponsor wanted under a new arrangement.

The plan sponsor was paternalistic. He wanted to take care of his employees whom he viewed as family. He wanted to make sure that the plan had low costs with great service and superior fund offerings. Many advisors would have choked at this point. How do you have a cheap plan with great service? Most plans use the assets of the plan to negotiate lower fees from the advisor and the record keeper. That was not an option in this case as the SIMPLE assets were tied up with surrender charges from the VA provider.

I was able to work with the advisor to think about this plan a little differently. Instead of structuring this plan with a soft dollar arrangement like all of the other proposals, this advisor decided to build the plan with a hard dollar billable to the company. This allowed the company to show its paternalistic nature and maintain low costs to the participants. Further, the advisor set up an arrangement through which he would bill the plan only for the time spent. The advisor prepared an outline of education that would be made available to the participants in a group setting and an estimate of how much time he thought it would take to service the plan quarterly. The cost was higher initially, relative to the other proposals being considered. However, walking the plan out three or four years, the costs were considerably lower than the other proposals’ because they were not growing with the assets. This point was further accentuated when including roll-overs from the old SIMPLE that would become surrender charge free. Most imporantly, the costs were reasonable based on the level of service committed by the adviser.

By thinking about the plan in terms of “how much time do I need to commit and what is my time worth,” the advisor was able to sell a small plan that covered his costs. Though it was more expensive initially, it was cheaper in the long term. Most importantly, it met the needs and the culture of the client.