For 5 Basis Points More

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Ever since I graduated school, I have gone to the same car mechanic for the past 16 years. Maybe Ralph is a couple of dollars more than someone else, but he’s always honest. He’s the type of businessman who shows that trust and good work is its own reward when you have such loyal customers such as myself. I’m not going to use a car mechanic who is 5 dollars less because my loyalty and faith that I’m not going to get ripped off is worth more than 5 dollars.

Yet I’m surprised when plan sponsors replace a good plan provider for something as little as 5 basis points. The work of a good retirement plan provider is certainly worth 5 basis points more or whatever is that negligible amount that the plan sponsor is going to save by using the plan provider across the street.

Again, plan sponsors must pay reasonable plan expenses. That means they don’t have to pay the lowest plan expenses. Plan sponsors who make a change of plan providers for something as little as 5 basis points end up costing themselves more than 5 basis points when the new plan provider isn’t as competent as the old plan provider.

 


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ary Rosenbaum, The Rosenbaum Law Firm P.C. | Attorney Advertising

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