The Iceberg of Retirement Plan Service


Everyone has seen the motivational posters with the iceberg, complete with the requisite statement about how there is so much below the surface.


This concept of an iceberg is very much like the fees conversation in the retirement plan world. We are all sick of hearing about it. We are sick of getting bashed in the press. We are sick of looking over our shoulders, waiting for an attorney to file a suit alleging that we have over charged and are on the hook for restitution to the plan. I think these suits and the negative press continue because like the tip of an iceberg, our clients only see what we do in the board room. We don’t take the time to show them the part of the iceberg that is under the water, which in this case is all of the other work that goes into a plan.

Most people outside our industry have no idea what it takes to run a plan. I am sure you have read articles about fees or studies that discuss how over-priced plans are. But no one ever discusses who is doing this work, or what steps are required to run a plan. Most of the articles I can find only talk about the cost of the investment portfolio, probably because that is the only piece of the equation that transfers from their other knowledge base. I’ll take that a step further: even a lot of people in our industry don’t know how much work goes into servicing a qualified plan. Think about other advisors in your office who don’t touch plans. Think about other professionals, like CPAs and attorneys, who ask questions leading you to believe that our craft is as foreign to them as rocket science is to most of us. Think about the last gathering that you attended where your specialty in plans came up and the person listening to you just stood there, mouth agape, when you told him what you do. It happens too often, right?

The reality is that there are a lot of moving pieces that many people, both in and out of the industry, do not understand. And that includes our clients.

Want proof (You knew that was going to come out if you are familiar with us)? Here it is: a client asks you to drop your fee, they most likely do not understand the time that goes into servicing his plan. Think about it for a minute. Most of what we know about someone else’s profession is limited to what we see them do, like the tip of the iceberg. In sports, many spectators do not understand the hours of daily practice professional athletes endure. Many of your clients probably only see the reports you provide at quarterly due diligence meetings and enrollment meetings. They see what you do when you are there with them and nothing more. Out of sight; out of mind.

We owe it to ourselves to show more. We cannot complain about being pressed for fees if we don’t educate our clients about our work. Do your clients know how much time you spend building the reports for the quarterly and annual meetings? Do they know how much time you spend answering phone calls and e-mails from participants? Do they understand the amount of time it takes to find a suitable replacement fund that will meet the standards of the Investment Policy Statement? Do they know how much work can go into ADP/ACP testing? When I sat down to write out all of the different tasks associated with servicing a plan, I was amazed. These are all real activities that take real time and real experience to manage effectively and efficiently. These are activities that you want done by a professional who is properly incented to do a good job. I have often said that I unsubscribed to Groupon because their ads were for things for which I want to pay full price- parachuting, dental work, and appendectomies. Our business should be no different. Retirement is too important to take a cheap approach.

Do our clients know how much of the service iceberg is below the surface? And let’s take that a step further: do you know all of these details? Have you put the effort into tracking the data so that you know how to price a case? Think about it from a business perspective. If you don’t know how much time you are spending on a given project, how do you know where to make your process more efficient? If you don’t know how much time a case takes to service, how do you know how many cases you can adequately service? How do you know when and where to add staff? Or software?

As we see the 408(b)2 disclosures evolve and the media continue to bash us for high fees, let’s start to give them a look at everything below the surface. We owe it to ourselves and our clients. We owe it to our profession.