401(k) Specialist Issue 4 - 2017 - 15

401(k) FIDUCIARY
have made a great name for themselves and
have built a really great, nice, tidy business. "
They're using low-cost funds, open
architecture platforms and providers. They're
crafting a core fund lineup and listing themselves
as a named fiduciary, and they are
providing advice to participants.
" I love those guys-that is not our competition
at all, " he argues. " In fact, we have
close to 30 or 40 RIAs that contact us every
month to ask us how we can work together.
We have to gently and politely tell them we
can't, because we serve as a 3(38) fiduciary
on the plan, and therefore don't partner
with external advisors. "
The fact that they are interested in such a
model, where all the components are tightly
integrated, indicates it's one they're still
having trouble replicating.
" If you're more of a wealth manager
and you've taken on a few 401(k) plans
maybe because you have business owners
as private clients, participant calls from
those plans could begin to significantly tax
your business. We just had an advisor from
Indiana call with just such an issue. So, find
a solution like ours to point those clients
to and focus then on the personal wealth
management instead, which is their bread
and butter anyway. "
Not that we're necessarily trying to overhype
his business, but a closer look provides
important insight into why it's so successful,
and why now. We can't help but remark that
a " solution like theirs " is tagged America's
Best 401k; a braggadocious, Martin Shkrelilike
thumb of the nose not likely to endear
Zgainer and his team to industry competitors
and colleagues.
" In large measure, at the outset, [the
name] was aspirational, " he counters. " We
wanted people to know exactly what
business we were in, who it was for-plan
participants in America-and that it was
going to be the best. "
Part of it was also to steer clear of confusion,
Zgainer claims, as " there are so many
companies in our business that if you asked a
random person if they know what the company
does, they haven't a clue. If you ask what
America's Best 401k does, the person would
say 'we think we're America's best 401k.' "
However, he likes the brand positioning
the name affords.
" When our competitors present against
us, the business owner will ask how they
compare with America's Best 401k, " he says
with a laugh. " The competitor has to answer,
'but you can't be better than the best,'
so it's kind of worked in our favor that way. "
Speaking a bit more altruistically, he
adds that it also reminds the team of the
" important work they're doing " to fix the
aforementioned broken retirement savings
model.
" We are talking about the retirement
savings of 88 million-plus Americans, which
is often their largest investment outside of
their home. The only reason we're doing
this is to rescue those retirement savings. "
Rescuing retirement savings and fixing a
broken model may sound hyperbolic, but a
significant portion of financial pundits, politicians
and the investing public agree, not to
mention many 401(k) advisors themselves.
So what else besides high fees is
driving industry angst?
" Granted, you could have a poorly-designed
401(k) plan, bad customer service and
no one-on-one participant help, which could
offset any advantages of a low-fee plan. "
However, if you can have those things,
" then you have to ask yourself, as a plan
sponsor, if my plan has total investment-related
fees of 1.80 percent as opposed to a
plan with investment fees of 0.60 percent,
then the mathematical consequence of that
difference could be hundreds of thousands if
not millions of dollars over time. "
It's that kind of fee mismanagement, longknown
but until recently rarely discussed, that
led Zgainer to start America's Best 401k.
In 2011, new fee disclosure rules-
404(a)5 and 408(b)2-gained traction, and
for " the first time in the over 30 years of
the defined contribution retirement plan
business, providers had to tell you what they
were actually charging. "
4 WAYS TO DEFEND AGAINST
DIRECT-TO-CLIENT DISRUPTORS
So, how do you defend against guys like this?
Take a Break, Tony-So-called 'Two Plan Tonys,' financial professionals geared more
towards wealth management that nonetheless take on a plan here and there for
their business owner clients, no longer cut it. Advisors can't be a little in or a little
out; the fiduciary stakes are just too great.
Low-Fee Fight-The need, and demand, for lower fees in retirement plans has been
covered extensively in both the trade and consumer press, and yet some advisors
still (still!) aren't getting it. 401(k) pariah Jerome Schlichter with the law firm of
Schlichter, Bogard, and Denton has a full pipeline of pending cases and plenty to do.
If that doesn't wake advisors up, nothing will.
No Place Like Home-A variation of the famous phrase, " All politics is local, " there's
little substitution for knowing a particular geographic area, specifically the one in
which the advisor lives. Large, national brands will attract a certain type of plan
and participant, as will advisors that can " manufacture opportunities in their own
communities by cross-working with CPAs and others in circles of influence and
charitable pursuits. "
Kill the Conflicts of Interest-No mistakes to exploit means no plans lost to competitors.
If the hard dollar fees are fair, and low-cost, well-performing, historically-strong
fund companies are being used with no proprietary interest on the part of
the advisor, Zgainer tells clients to stick with whom they're with. But it's a " sad fact "
that it's often not the case. .
ISSUE 4 2017 | 401kSpecialist.com
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401(k) Specialist Issue 4 - 2017

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