Broadcast Retirement Network’s Jeffrey Snyder discusses the ins and outs of selecting a recordkeeper for an employer’s 401k (or 403(b) or 457(b)) plan with World Investment Advisors’ Robert Scherzer.
Jeffrey Snyder, Broadcast Retirement Network
Two, one. Joining me now is Bob Scherzer. He is the Managing Director for the New York Office for World Investment Advisors.
Bob, great to see you. Thanks for joining us this morning. Hey, great to be here.
Thanks, Jeff. Yeah, and you have a wealth of knowledge. Your resume is too long to talk about, but you have been in the retirement defined contribution space advising clients for such a long time, probably going on over 30 years, over three decades.
Bob, I wanted to ask you about a very important part of the fiduciary process, and that is selecting your record keeper. I guess my first question is, in the age of AI, is it more important or less important as you go about this record keeper search and evaluation process?
Bob Scherzer, AIF, World Investment Advisors
I think it’s more important, Jeff. I mean, when you think about it, all record keepers now, they can all do the math, right? Everybody can give you a statement, and the money is held in trust.
In the world today, most record keepers can certainly deliver all the different investments, but there’s quantitative, like how much does it cost? But it’s still qualitative, and AI doesn’t explain the value propositions of record keeper A and record keeper B, right? So what you really need to do as an employer is understand what is the experience your participants are going to get?
Yes, you might be able to save a dollar or two, but if your employees are unhappy, is it really worth it? So AI doesn’t really change that. It doesn’t change the experience that your employees are going to get, whether they’re using Fidelity or a Principal or a T-Row Price, and AI hasn’t figured out that just yet.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, it certainly, as far as I can tell, doesn’t have those soft skills, and I think you’re right, my own assessment is it’s the operational aspects of maybe approving or helping approve hardships and things like that. Bob, you mentioned it’s not always about the fees. Fees are important, but we’re always reminded that it’s about the value.
That team across the table, so that record keeper team, that relationship manager, that compliance person, that communications person, if it applies, understanding what their capabilities are is probably a very important part of the process.
Bob Scherzer, AIF, World Investment Advisors
It really is. One of the things that makes a good record-keeping search is understanding your client. So one of the things that we’ll do is we’ll actually kind of survey our client.
Is it a more blue-collar firm? Is it a more white-collar firm? Are they more investment-savvy, less investment-savvy?
What are they looking for from a record keeper? Is it they’re going to be more into their website, or do they want more boots on the ground? As we say, let’s pick a couple of really high-quality record keepers out there, and there’s lots of them.
But let’s say Empower is one of the larger record keepers. The experience somebody might get from Empower is going to be very different than the experience that you might get from Transamerica. Empower might be perfect for one client and terrible for another client.
Transamerica might be perfect for one client and terrible for another. It doesn’t mean that one’s better or worse. It just means that they’re different.
So really understanding what the value proposition is and how they’re going to deliver those services is really, really critical. Fees are important, and everybody talks about fees, fees, fees, and that’s a critical responsibility, and it’s something that an employer has to take very seriously and make sure they deliver it. But remember, the Department of Labor doesn’t say that you have to have the lowest cost.
They just have to be reasonable. So in the end, making sure that you understand the value and what they’re delivering to your participants is very important.
Jeffrey Snyder, Broadcast Retirement Network
Bob, does the code section, does the type of plan? I know you work on a lot of different plans. Many of our audience may not be aware.
They may have heard of 401k, but there’s also 403b. There’s government 457b plans. There’s 401a.
Does that matter when you’re trying to select that record keeper? Does expertise matter?
Bob Scherzer, AIF, World Investment Advisors
It really does. I mean, there are certain categories where you think of certain record keepers and others where you don’t. As an example, we do a lot of work in the independent schools in that category.
TIA is a very strong provider that we do a lot of work with. There are other record keepers also very strong in the tax exempt strength, in the tax exempt space. So you have to kind of know which type of plans.
Because let’s say in a 403b plan, if you have a client in New Jersey, do you realize that New Jersey doesn’t recognize 403b’s? So now we’re taking a look at some record keepers are saying, gee, maybe you should do a 401k to harvest the state tax deduction. So it is kind of nuanced.
So you want to make sure if you’re talking to a record keeper, what code are, is it a tax exempt client? Is it a for profit client? Who are you looking at for what type of business?
Jeffrey Snyder, Broadcast Retirement Network
Bob, I’m an old fashioned guy, not old fashioned, but I mean, I come from, I used to, I’ve done tons of searches. The world of searches has really evolved. There’s a lot of tools out there, including ones that probably include a lot of artificial intelligence.
How do you approach doing the search? Do you, do you need the right, an RFP or an RFI, or can you just rely on, you know, a database? I don’t want to sound, I sounded negative there, but, but you know, I’m not negative on databases, but do you just rely on the data or do you do the official, the full search?
Bob Scherzer, AIF, World Investment Advisors
So I think there’s the, the term RFI and RFP, right? RFI, request for information, RFP, request for proposal, and they’re both searches. I mean, every year or two, you really should, there’s a lot of, if you’re just looking for benchmarking, just trying to figure out, are you, are you checking the boxes?
I think the database is pretty good, right? You can kind of look at, you know, whether you’re looking at a plan that’s a hundred participants in $18 million or a little bit smaller, a little bit larger, and you compare them with other plans of that size and scope. You can get a pretty good sense from database.
And I think if you’re just saying, you know what, we just did a full-blown search a year ago, and now it’s a year or two later, I think that does a pretty good job. But every three to five years, generally, I think you’ve got to write that RFP. I think you’ve got to go out and get more of those questions.
Now, for sure, there are certain must-haves, right? I mean, there are certain things that you’re required. You know, you really want to dig deep on cyber and there are certain things that you really need to know that are a responsibility of an employer.
But then ultimately, you know, you’re going to deliver that report and the report’s going to be many pages and it’s going to have a lot of things in it and you want to kind of check those boxes. But then I think if you’re doing a good job and you’re hiring a good search consultant, there’s going to be those 10, 15, 20 questions that are really customized to meet the needs of that given client. What is really specific and special about that organization?
If it’s a tax-exempt organization, a lot of times they may be a little bit more conservative than a client that’s a hedge fund. So maybe a lot of those conservative, if it’s a 403B as an example, they can’t have collective investment trusts. You know, you’re going to be looking at their fixed account.
Well, there’s a lot of nuances regarding general account, guaranteed funds, fixed accounts. You might have a half dozen questions just on fixed account, guaranteed income, whatever it may be just right there that might be very different than working with that hedge fund. So you really want to kind of, you have to kind of really customize those questions to kind of fit that audience.
Jeffrey Snyder, Broadcast Retirement Network
Yeah. And that’s how you express, I would think that’s how you express to the potential suitors so they can kind of craft that response. They know more about the client.
They understand what the client may be looking for. Bob, we’ve had a great conversation. We could talk about RFPs, you and I for a long period of time.
And that just means I’ll have to have you back on the program again. Thanks for joining us. And we look forward to having you back very soon.
Thanks, Jeff.
Bob Scherzer, AIF, World Investment Advisors
I appreciate it.