Retirement Plan ‘Finals Presentations’ Can Do Real Damage

A funny thing happened on my way to cleaning up your retirement plan.  A “Finals Presentation” went terribly wrong, yet again.

What, you may ask, is a “Finals Presentation”?  Great question!  A finals presentation is the vetting process through which someone at your firm decides who is going to run your retirement plan.  They may not think of it as a “finals presentation”; however, that’s what the investment world calls it when given the opportunity to pitch your company on how great they are at running retirement plans.  Many people in finance spend years hoping for finals presentation, considering it a fast track to a successful career (because once they sell the plan, they can go about the more lucrative work of selling rollover IRA’s, brokerage accounts, insurance, and a whole host of other things to the company and employees). 

There are a host of different types of companies, both large and small that would love the chance to pitch your employer; banks, insurance companies, investment companies, brokers, and all different types of financial advisors are the most common.  Getting to a finals presentation is highly coveted by those who work in finance.  I’ve been to more than I care to remember.

The people at your company who listen to these presentations go on to decide all of the people involved in running your plan, which makes these meetings very important.  Get it wrong and they might get in trouble, and you’ll all end up having to work extra years in order to retire.  As they listen to such presentations, key decision makers at your company decide on such things as; the plan’s advisor (if there is one); the tax advisor; the lawyers who create the documents for the plan; who holds the money; what investments are going to be in the plan; and a host of other critical elements of your retirement plan.    

On paper finals presentations look like a valuable step, and I’d even argue they’re necessary if you want a good workplace retirement plan.  However the entire process is sometimes hijacked so that a few people can enjoy themselves.

A frightening lack of accountability

Here’s the frightening truth: Your group retirement plan stands out as the only thing your company decides that might never be held accountable.  It is, unfortunately, very common for unsophisticated employers who don’t really understand retirement plan operations to give in to sales and/or political pressures and allow the plan to fall into the wrong hands.

Imagine this process in an environment where the key decision makers at your company don’t care. Or perhaps even worse, want to milk plan salespeople for all they’re worth.  If your company’s retirement plan is big enough, the finals presentation salespeople might fly them to their company’s headquarters, put them up overnight, and take them out to several nice meals.  Trips might include a steak dinner on the river in Chicago, Times Square in New York, or a sports game in Boston.  This influence peddling might simply stay local as well, such as a night out on the town.  The people making the decisions about your retirement plan might be dazzled by this special attention.  However, such catering really has nothing to do with your plan or how it’s run.  Worse, these sales organizations have calculated that by spending several thousand dollars lavishing attention, they might makes hundreds of thousands off your accounts.  That’s hundreds of thousands of dollars that aren’t compounding in your account to create retirement readiness for you.  Which in turn means you might have to work extra years to make up the difference in lost earnings.

Would you work an extra two years so that a few of your co-workers can enjoy a night out on the town?  How about eleven extra years.

It might even just be for show

Often the choice of who is going to be hired is made well before the finals presentations.  It could be that they want to hire a friend or personal financial advisor, or broker or insurance agent of somebody high up at the company, or the firm’s bank or accounting firm but want it to appear that they’re being fair, so they schedule a few finals presentations. 

I can usually tell the ones who don’t take it seriously.  Since we’re not a sales organization, my firm doesn’t offer nice meals or fly anyone to a provider’s headquarters, since we’re not affiliated with any of them.  This means that half-hearted searchers lose interest quickly.  Without some sort of offer on the table, it can be difficult to get the key decision makers (they’re often referred to as Responsible Plan Fiduciaries) to focus on the real issues, such as fees and services. 

In a recent example of finals presentation gone wrong, we were invited to a finals presentation by a vendor to a 401(k) Plan.  We were one of three firms to be given a few pieces of very basic information about the plan.  Wanting to do the right thing, we requested details about how all of the plan fees work and copies of the service agreements.  We were told that we shouldn’t need such information, which completely robs anyone competent from addressing their plan’s cost effectiveness or functionality.  This stuck as very strange behavior, until we realized that they’d already made their choice before meeting two of the three would be providers.  We put together what we could, leaving blanks and estimates in what should have been a very detailed report, only to find out that the company had decided who they were going to work with long before we delivered any of it.  They were only meeting with two others in order to create the appearance of due diligence.  Someone close to the matter let me know so that “I didn’t waste too much time on them”.  To make matters worse, when we showed up for the finals presentation the key decision makers didn’t even bother to attend the meeting.  Those few who remained did not ask a single question.

In a similar example, the key decision maker was presented with an action plan to fix several major issues, all designed to help his workers better prepare for retirement.  Instead, he was swayed by a slick broker who showed him how certain other funds would have doubled his money the year before… if only he’d been in them.  Funny how hindsight makes any stock picker savvy.

Anyone hard working and lucky enough to be invited to finals presentations should not expect to win all of the business.  No one can be all things to all people.  However, there is only one lens through which such an evaluation can be viewed: what is in the best interest of the plan and its’ participants.  No other means of measuring a group retirement plan’s service providers should ever be accepted.

All of this effectively makes your retirement plan the last bastion of deceptive sales practices.  Sales practices in which your coworkers are sometimes complicit.

Retirement Plan 'Finals Presentations' Can Do Real Damage first appeared on NerdWallet August 7, 2015.





The information and calculators provided via this Web site are general information, meant to introduce you to our areas of expertise.  Articles, calculators
and other sources of information are not intended to replace the professional advice of a trained financial professional.

Investment advice is offered by Plan Partners, LLC, a Registered Investment Adviser.  Plan Partners, LLC is an Ohio Registered Investment Adviser and accepts clients outside of Ohio based upon applicable state registration regulations and the “de minimus” exception.
We offer you a wide range of services that are designed to help you, such as: a 401k plan, fiduciary and plan administration, a model portfolio and executive compensation in Cleveland, Ohio.

Securities offered through IFS Securities, Member FINRA/MSRB/SIPC, 3414 Peachtree Road NE, Suite 1020, Atlanta, GA 30326, Phone: 404-382-5223. Plan Partners LLC and IFS Securities, Inc. are not affiliated companies. Plan Partners and IFS Securities do not provide tax advice. Any discussion of taxes herein is for informational purposes. You should consult with an attorney or accountant concerning tax and/or legal advice. Investing involves risks, including possible loss of principal. Please consider the investment objectives, risks, charges and expenses of any security carefully before investing.

This communication is strictly intended for individuals residing in the state(s) of: Ohio and Florida. No offers may be made or accepted from any resident outside the specific states referenced.

Website Design For Financial Services Professionals | Copyright 2018 All rights reserved