It’s All About the Leads . . .

shutterstock_400315855_blogThe play Glengarry Glen Ross covers two days in the lives of desperate real estate agents trying to sell land to unwitting prospective buyers.  In the play, published in 1984, the salesmen are desperately in search of “leads,” qualified and willing buyers of what these salesmen are pushing.  Is it possible your retirement plan has migrated into a tool of lead generation for the retirement plan service providers you’ve partnered with?

Back in June, I published a blog post on the factors driving recordkeeping price compression.  Since then, we have been unpacking the five factors we have identified driving prices lower:

In today’s installment, we’ll tackle the common practice of cross-selling retail financial products to participants.

The compression of fees in the retirement plan marketplace has by-in-large been a positive phenomenon for participants, with the costs of maintaining a retirement benefit account contracting at rapid rates.  The cost for retirement plan administration is routinely sub-$100 per participant for mid- to large-plans. 

At $100 per year, that makes the cost of providing recordkeeping and education services to a participant less expensive than satellite radio, Apple Music, Netflix subscription, and HBO.  My recordkeeping service may cost less than the four pack of razors that shows up at my house each month. 

Given the complexity and risk of retirement plan recordkeeping, why would companies grossing billions in revenue elect to play in such a low margin market?  Perhaps it’s not the plan these companies are interested in, but the participants who utilize it.

Retirement plan administrative solutions are rich with data.  Plan administrators know where participants live, their income, their savings patterns, and how long they’ve been with their employer.  By serving as the face of the retirement plan data, these financial services companies also maintain much higher interest, and potentially trust, with the employees they serve.

For those of us who work in the industry, the transition from institutional services to retail marketing has been pronounced and notable.  Now there is increasing evidence that marketing services to participants may be the next area of focus for litigators.

In the case Cassell v. Vanderbilt, the amended complaint states,

“…Defendants breached this duty[1] by allowing … the Plan’s recordkeeper to obtain access to participants, gaining valuable, private, and sensitive information including participants’ contact information, their choices of investments, the asset size of their accounts, their employment status, age, and proximity to retirement, among other things… to sell ... products and wealth management services to the Plan’s participants, and failed to even attempt to determine the value of this marketing benefit.  This information was particularly valuable … give that it had already been endorsed by Defendants as recordkeeper.” 

Read the full case here.

The value of the list is one of the critical issues of interest in the complaint.  For sponsors looking to integrate retirement planning into broader financial health and estate planning, restricting vendors to discuss issues outside of pure retirement may limit the effectiveness of what’s being delivered.

While it remains to be seen how the Vanderbilt case will turn out, there are some steps clients may consider taking to manage their vendor relationships.

  1. Ensure the Committee knows how their providers are paid and for what services that payment covers
  2. Communicate with employees the role of the education providers at your institution and call out potentials for conflicts
  3. Notify participants that approaches from your providers outside those paid for by the plan have not been reviewed or endorsed by the sponsor, and encourage them to shop intelligently from products and services not subject to fiduciary review

Incorporating these steps in to your annual fiduciary work plan can help increase awareness of the risks and opportunities of opening your list up to your provider.



Multnomah Group is a registered investment adviser, registered with the Securities and Exchange Commission. Any information contained herein or on Multnomah Group’s website is provided for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.   Investments involve risk and, unless otherwise stated, are not guaranteed.  Multnomah Group does not provide legal or tax advice.  Any views expressed herein are those of the author(s) and not necessarily those of Multnomah Group or Multnomah Group’s clients.

Comment On This Article