History is littered with formerly successful companies who didn’t understand the change in their industry and fell by the wayside only to be succeeded by their competitors that did. Montgomery Ward was one of the largest national retailers, only to falter because unlike Sears, they didn’t understand the change in the demographics in the country in the move to suburbia. Blockbuster Video, the most successful video rental company is on a slow way to oblivion because they didn’t foresee the viability of DVD rent by mail and only offered that service 6 years after Netflix first did. Pan-Am was the most respected airline in history, but its prestige as the beacon of international travel couldn’t survive in a deregulated airline industry where they had to compete with other carriers for international routes. These former business giants stumbled because they didn’t stay ahead of the curve. In business, you have to stay ahead of the curve and be cognizant of the changes in your industry. As I always say, you have to either change with the times or the times will change you.
The retirement plan industry is a constantly changing business. Once dominated by trustee directed defined benefit plans, the retirement plan industry is now focused on participant directed 401(k) plans. Once riddled with hidden fees, plans sponsors will finally see the light and the fees they are being charged by their plan providers with fee disclosure coming in 2012. All retirement plan providers whether they are financial advisors, third party administration (TPA) firms, auditors, or ERISA attorneys must be aware of the changes within the retirement plan industry and get acclimated to it. If the provider fails to understand the changes or decides to be like Don Quixote and fight the tsunami of change, then they stand the risk of being forced out of the industry.
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