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Reply to 401K Market and VA is He an RIA     
Old 07-26-2016, 11:56 AM   #1
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401K Market and VA is He an RIA 401K Market and VA is He an RIA
About 8 years ago my best commercial insurance client asked if I can do a 401K for his growing company. At that time it was 8 employees and they have grown to 26 employees. I said that I gave up my Series 7 license in 2000 and stopped being an RIA in 2002. All that I can do for you is an insurance company 401K that has variable annuities in it. You will have over 50 investment choices, the admin side is inexpensive but there will be a higher cost on the balance side. The insurance cost was @ the usual cost from insurance companies with the same arrangement. Since then I've seen much higher costs then the one I presented.

The owners looked at the prospectus, costs, etc.. and said go ahead.

Last week someone came by and said he is an advisor and that I was stealing from them. They knew back then that it was all I could do but they wanted to do business with me. The company is past the surrender charge period so they can move without that penalty.

So the advisor is with a big, big firm. I looked and they are 98% insurance people (CLU, CFP, ChFc, etc.). I found two securities people on their website and one RIA. Their BD is an insurance company BD. The insurance network they are with has a VA that has a lower cost. But from what I've found the way the firm works is as an RIA. I would not find part 1 or part 2 of their ADV. From searches on the internet it appears that their RIA fee is 1%. The 1% and the insurance VA cost would place them higher then my current plan.

They are printed up in a magazine and it is a very impressive article. Ah but look further, at the bottom, small print and you see that they paid to be put in the article. It reads like this - "and thereafter paid the standard fees to "magazine name to be featured in this section."

They walk about in expensive suits and 25 years ago I went casual. They have a fancy, expensive office and I am more casual. They pay for fancy articles about them. making them look very important --- I don't do that.

Call me old school but if you go around with articles about your company that make it sound like the magazine came to you but in reality you paid them --- that isn't top shelf ethics. So if my guess is correct, we will be very close in cost but I am afraid that the fancy trapping will sway my client toward them.

In the past I have run into agents on forums that feel marketing and making the sale is the most important part of work. I may get some flaming from them but that was long ago and maybe they have moved on.
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Old 07-26-2016, 01:03 PM   #2
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401K Market and VA is He an RIA Re: 401K Market and VA is He an RIA
With all the new DOL regs going on, I think some of this will certainly be reduced. I think a "Switch" letter will be required to document total fees and what the fees pay for.

If the net total fees increase on the new plan, BUT they are taking on an RIA/fiduciary role as the plan provider/sponsor/advisor... then that sounds reasonable to me.

It's not about total cost anymore, but costs do play a part. It's about the fiduciary liability the advisor is willing to take on.

If they are overpaying for their image and would rather talk down about their competitors, let them. It is part of the game, but will they treat their clients "like a number"? Can they have genuine and sincere conversations with them? Who knows.
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Old 07-26-2016, 03:36 PM   #3
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401K Market and VA is He an RIA Re: 401K Market and VA is He an RIA URDRWHO is the thread starter for: 401K Market and VA is He an RIA

Who knows is the question of the day.

In 1984 I started in this business and made it my mantra to not talk down the competition. I talk about the good of what I am selling and not the bad that appears in the other plan.

The other thing I have learned is that if a client moves to one of the suspicious slick marketers there is a high probability that once the cloak of invisibility falls off, my clients will return. Sometimes they won't because I think they feel a bit sheepish for falling for the slick unfounded presentation.

Originally Posted by DHK View Post
With all the new DOL regs going on, I think some of this will certainly be reduced. I think a "Switch" letter will be required to document total fees and what the fees pay for.

If the net total fees increase on the new plan, BUT they are taking on an RIA/fiduciary role as the plan provider/sponsor/advisor... then that sounds reasonable to me.

It's not about total cost anymore, but costs do play a part. It's about the fiduciary liability the advisor is willing to take on.

If they are overpaying for their image and would rather talk down about their competitors, let them. It is part of the game, but will they treat their clients "like a number"? Can they have genuine and sincere conversations with them? Who knows.

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Old 07-30-2016, 05:35 PM   #4
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401K Market and VA is He an RIA Re: 401K Market and VA is He an RIA
Just because they are with a certain B/D or RIA does not mean they are captive to one single product.

You also have no clue what they are charging despite what the ADV says. What you state on the ADV is the max you can charge, but you are able to adjust that as you see fit.

Also, many of the modern Group VA products do not price in the Adviser Comp as a hard dollar for dollar charge against the Assets of the Plan. Many wrap it up into the overall Recordkeeping charge, and offset the difference with revenue sharing from the Funds. Exactly where those 12b-1 fees are going has been a big issue recently, and more and more carriers are using them to offset the Plans cost vs. pocketing the extra money.



Obviously the guy trying to poach your client is an ass to come into your office and say that. They probably know enough to be dangerous. Bashing the existing Adviser or Plan is never a good way to win business. Most Owners do not appreciate being told they made a bad decision. You simply offer a "better" option than the "pretty good" option they have currently.


But as the Adviser, you should take this as a warning to review the Plan and see if you can negotiate a lower expense charge for them. After 7 years Im sure it has grown.

For the Fees, all that matters is what the total average expense ratio of the Plan is (recordkeeping fees, advisor comp, fund expense), and what the total assets in the Plan are.

So how large is the Plan and what is the total average expense ratio?
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Old 07-31-2016, 02:28 PM   #5
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401K Market and VA is He an RIA Re: 401K Market and VA is He an RIA
Originally Posted by scagnt83 View Post

Obviously the guy trying to poach your client is an ass to come into your office and say that.
I *think* he meant that the new advisors went to his client's office and told the client that URDRWHO is "stealing" from them with an assumed higher expense ratio or something. I know that paragraph confused me a bit too.
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Old 08-03-2016, 07:01 PM   #6
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401K Market and VA is He an RIA Re: 401K Market and VA is He an RIA
I fail to see the issue or question here. There are lower and lower cost alternatives in the market than 8 years ago. Eventually one of them is bound to visit your client. You may have done the right thing 8 years ago, but part of the job of advisor is to keep reviewing the solutions provided. If the client knew every year when they met with you that their 401k was not cost effective, and reviewed options, chances that the other advisor gets to meet them is very low.

Also the money to be made here is the permanent life sale, not the small 401K sale into an annuity. I would give away all my 401k business all day in exchange for the permanent life, disability, executive bonus, buy-sell etc.

I would recommend your client keep you for the life business and recommend they also check out Vanguard 401k or betterment 401k. I am sure they both charge less than the competitor here.
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Old 08-04-2016, 12:09 PM   #7
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401K Market and VA is He an RIA Re: 401K Market and VA is He an RIA
Originally Posted by walthamny View Post
Also the money to be made here is the permanent life sale, not the small 401K sale into an annuity. I would give away all my 401k business all day in exchange for the permanent life, disability, executive bonus, buy-sell etc.

I would recommend your client keep you for the life business and recommend they also check out Vanguard 401k or betterment 401k. I am sure they both charge less than the competitor here.

He is the Advisor for the whole companies 401k Plan. He is trying to keep the Plan, not peel off an employee into an Annuity.

And there is at ton of money in the 401k market. I will take a 401k client over a NQDC client any day of the week.


Vanguard has a strong 401k Platform, but its sweet spot is Plans over $5mm.



Betterment has an extremely cheap plan... but cheap in quality.

They offer super cheap index funds.... and charge a fairly high RecordKeeping Fee. So Betterment makes a killing off of those Plans....

Also, having just index funds is generally considered a Fiduciary "grey area". Very few ERISA Attorneys recommend going that route for liability reasons.

Also, the business owner has ZERO control over the Plan with Betterment. Most owners hate that setup.

If an owner has zero existing assets and needs a startup Plan... then Betterment is not a bad option. For an existing Plan its a totally different story.
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