I used to spend much time trying to explain irrational behavior through rational thought and it’s really impossible. If you’re a plan provider, don’t waste your time doing that.

There are some plan sponsors out there that would rather cut their nose to spite their face or continue with a bad plan provider because of a crazed notion of “loyalty”.

Most of the time, the plan sponsors you will meet will make rational decisions in selecting plan provider and making any plan changes. Some just won’t because of an irrational choice or decision.

Seven years ago, I helped a plan sponsor out with their 401(k) plan.  They had no financial advisor, they had no investment policy statement, they had no investment education provided to plan participants, and hadn’t changed funds in a decade. They eventually fixed the plan, but they hired new plan providers without consulting me. I was offended by that because the same trustees who neglected their plan now all of a sudden thought they knew better than me because they didn’t seek my opinion. They also changed third party administrators and picked one that wasn’t suited for a plan that size. It’s irrational, but that’s what people do.

Present day, the plan has a huge compliance problem that may cause the plan sponsor over $100,000. One of the trustees reached out to me while the other one spurned my services, probably because of a grudge or because they didn’t want to me say: “I told you so.” I’m not like that, my position is to help plan sponsors out as much as I can at an affordable price. This plan trustee would rather pay three times as much in legal fees because of a grudge. People who make bad choices usually consistently make bad choices.