Round 1
LFI goes for a quick knockout by comparing its 130 years
of experience to CAI’s paltry 30. The crowd cheers, but wait. CAI
counterpunches by claiming that it actually has more experience in working with
qualified retirement plans than LFI. The truth of the matter is that most Large
Financial Institutions did nothing more than invest the money for qualified
pension plans until 401(k) plans began to take hold in the mid to late 1980s.
Most LFIs then have less than 15 years experience administering retirement plans
and the great majority of that experience is with 401k plans alone. CAI, with
its 30 years of administering the full range of 401k, profit sharing, money
purchase, stock ownership, and defined benefit plans actually has far more
experience than nearly every LFI. The crowd is stunned as the ROUND ONE WINNER
IS CAI.
Round 2
The bout quickly settles into a long term war of
attrition. LFI gets in some body blows as it holds up its 40,000 person
staff as proof of its strength and staying power. More than 99% of those
employees, however, know nothing about designing and administering
qualified retirement plans. The body blows begin to land with a little
less power as these employees are quickly escorted from the ring. Of those
that remain, most are recruits who know little more than how to punch
numbers into a computer. The high level of turnover at LFIs further
reduces the number of qualified personnel. By the time the remaining
people are split among the 10,000 or more clients that LFI has, there is
very little left and CAI easily shrugs off the weak punches still being
landed. As the round wears on, LFI shows signs of fatigue as CAI reveals
that more than half of its 40 person expert staff has been with the
company for more than 10 years. CAI’s people are veterans in the
retirement plan field and can hold their own against the staffs of even
the largest LFI. When you take into account the fact that LFI’s experts
have more clients and more layers of people between them and the clients,
the surprising ROUND TWO WINNER IS CAI.
Round 3
Despite trailing 2 rounds to none, LFI enters round 3 with
the confident boast that its fees are lower than CAI’s. Since this is actually
true in some cases, a small drop of blood appears on CAI as the blow hits home.
CAI surprises the crowd, however, by starting to "Float like a
butterfly." It dances around by stating that the difference in fees is
generally very small, and then it "Stings like a bee" with two telling
punches. First, it reveals that LFI frequently builds in a hidden charge of 1%
to 1.5% of the plan assets in addition to its regular asset management fees.
Further, there are sometimes deferred sales charges, or loads, which can shave
another percent or two (or five) off of the annual yield. CAI then displays some
of the techniques it can use to allow companies to increase benefits and
contributions for selected groups of employees and thus to better achieve their
clients’ objectives. These blows send LFI staggering to its corner as the
crowd realizes that by the time the hidden fees and lost opportunity costs are
added in to the hard fees charged to the company, LFI is actually far more
expensive and the ROUND THREE WINNER IS CAI.
Round 4
LFI knows its in trouble and so it goes for a wild
roundhouse punch by stating that companies should go with them because they have
a far better team of lawyers than CAI. This claim is true; LFI does have a much
better team of lawyers than CAI. The problem is that those lawyers are there to
protect LFI, not its clients. The teams of lawyers hired by the Large Financial
Institutions make sure that when a mistake is made it’s the client’s fault,
not LFI’s. They do this by sending out complicated data requests which among
other things ask the client to identify who his Highly Compensated Employees
are. This is a complex determination which affects every aspect of
non-discrimination testing. Get it wrong and your plan can be disqualified or
you can be forced to deposit thousands of extra dollars. CAI is not a law firm
but our paralegals are there to assist our clients and we will recommend ERISA
legal counsel when it is needed. Our goal is to do what is best for our clients,
not to protect ourselves against being sued by them. The wild roundhouse punch
misses CAI completely and lands square on the jaw of LFI who drops to the canvas
and is counted out by the ref. The battle of the century ends with CAI KNOCKING
OUT LFI IN FOUR ROUNDS.
The bottom line is that hiring an independent consultant like CAI is the only
way for a company to be sure that it is getting the most out of its retirement
program. If, after reviewing your situation, we feel that we cannot provide
additional value over what is being offered by your favorite Large Financial
Institution, we will tell you that. If, on the other hand, we feel we can add
something, then you will be getting the best of both worlds: top level
consulting from CAI, and the investments you want through your favorite LFI.
If you would like to see what we can do for you, try our free Express Study.
