What's Your Lane?

I’ve heard it said that a good coach can change a game, but a great coach can change a life. I have had a lot
of coaches in my life, first in sports, and now in business, and some of the advice and analogies I’ve heard from them along the way still stick with me today.

One analogy that has always stayed with me came from a football coach I had in college. After practice one day, while addressing our team, he talked to us about synergy, explaining that by working together, we could accomplish more than we could by working as individuals.

To make his point, he gave an example of plowing a field. He explained that a single mule could pull a single-blade plow, but two mules working together could pull a three- blade plow. By combining their efforts, the two could perform more than double what one could do on their own.

THE ‘BRIDGE BUILDERS’

What does a story about a football coach and mules plowing a field have to do with retirement plans? Well, there is no argument that the services that advisors and TPAs bring to a plan sponsor and their participants complement each other, or at least that they should, but while there are many examples of TPAs and advisors working together in harmony, I think it’s fair to say that generally, things could be improved.

So, since early 2021, a few members of ASPPA and NAPA brought together by Nevin Adams have worked as an informal committee focused on the relationships between retirement plan advisors and TPAs, with the goal of improving the synergy between them.

Since we began, ASPPA and NAPA have run several articles in both their newsletters and magazines on the topic of improving advisor and TPA relationships. Also, in April 2022, a panel of TPAs led a workshop session on the topic at the NAPA 401(k) Summit in Tampa.

In the “Bridge Builders” cover story about the group’s efforts published in the Summer 2022 edition of Plan Consultant, Adams noted the need to “help the TPA and the advisor to better communicate and recognize where the lanes are” and to “quit fighting over who owns the relationship and come together in a way that will allow that relationship to really function for the betterment of everybody—not the least of which is the plan participants and plan sponsors we’re all trying to work for.”

The article noted that after receiving feedback from both advisors and TPAs, it became clear that some of the biggest barriers to a synergistic partnership come from miscommunication, inaccurate expectations and a misunderstanding of each other’s roles—and that these barriers must be acknowledged and addressed purposefully if we want to create meaningful improvement.

Having acknowledged that there are barriers, the team focused on ways to begin setting accurate expectations and clearly identifying roles and responsibilities.

‘ROLE’ PLAYING

That Summer 2022 cover story in Plan Consultant included a TPA Assessment Checklist, an updated version of which was recently included in a NAPA Net post titled, “Have You Hugged Your TPA Lately?” The checklist is intended to be a first step in helping advisors and TPAs set accurate expectations as they establish new ones or evaluate existing ones. But it is only a start, and there is much work to be done after the partnership selection has been made.

If you think about it, you wouldn’t interview a new employee, asking them all the right questions to determine if they are a fit for your team, hire the most impressive candidate, and then just put them to work without explaining their new role or checking in on them. The same concept applies to a successful TPA/advisor relationship. To use Adams’s term, both need to know their “lanes”—and just as importantly, both need to stay in their lanes. To be successful, everyone needs to know their role and continue communicating throughout the relationship.

Whether partnering together on a single plan or an entire book of business, there are myriad services to be provided on an ongoing basis. At some point, every plan requires setup, participant enrollment and education, recordkeeping, compliance, distributions and possibly loans. Regardless of whether the plan is bundled or unbundled, someone will need to take responsibility for the tasks that fall in these service areas. In too many situations, ownership of these tasks is merely assumed, and not specifically assigned or agreed upon.

TAKING A DEEPER DIVE

Many of the criticisms the group has heard over the last year and a half have centered around services duplicated by the recordkeeper, confusion by plan sponsors regarding points of contact, lack of service, and lack of communication. With so many tasks to complete, there are many areas in which a misstep can occur, and the more plans a particular TPA and advisor partner together on, the more opportunities there are for these missteps.

Here are a few examples of the criticisms that the group uncovered.

Duplication of Services

First, duplication of services provided by a recordkeeper. In many cases, there is a very good reason to involve the TPA in the loan and distribution process. But in other cases, there may be reason to allow the recordkeeper to handle this task without the TPA. Generally, when a TPA processes distributions, they charge a fee to do so. And often, recordkeepers also charge a processing fee. If the assignment of responsibility is not discussed up front, with all options identified, sponsors and advisors can be frustrated over duplicated fees that they did not expect.

On the other hand, if the decision is made to allow the recordkeeper to process loans and distributions, there are requirements for a recordkeeper
to be able to do so in an unbundled plan. They need to be able to apply vesting (assuming the plan has a vesting schedule) or determine if the participant has accrued additional contributions beyond what is currently included in their account balance, both of which rely on continuous updating of employee service credit. There are ways to account for this, but without thoughtfully addressing the distribution process up front, things can go haywire, leaving everyone frustrated.

Eligibility Determination

Another example that really stood out this past year was determination of eligibility. When asked if they calculate eligibility, most TPAs would say “yes.” The problem is that in most cases, TPAs are calculating eligibility for employer contributions, or verifying eligibility for deferrals after the end of the year, once census data is received.

Many sponsors or advisors may hear that the TPA determines eligibility, and assume this means they are doing so on a per payroll basis and assisting the plan administrator in determining when an employee becomes eligible to begin deferring to the plan. As TPAs, we know that this wouldn’t be possible unless we had access to census information with each payroll, which isn’t usually the case. And even if that access did exist, determining eligibility for deferrals still may not be part of the service agreement since it requires ongoing attention that may not be included in the service model (or factored into pricing).

While these examples may seem obvious to the TPA, they may not be as obvious to those who don’t do what we do every day. And because they
are seldom discussed up front, they are often a source of friction. Luckily, with a little proactivity, these and many other functions can be clarified easily by creating a process to identify and assign services among the team, leading to better communication and understanding of the roles of each party.

To assist with this process, courtesy of Linda Chadbourne of Beacon Benefits, the “Assignment of Responsibilities Guide” on p. 30 is provided for TPAs to use as a tool with advisors to clarify roles, assign responsibilities and increase communication. We anticipate that by creating a process that opens the dialogue, the guide will help to bridge the gap between advisors and TPAs, leading to a more productive and harmonized partnership. For those TPAs focused on improving their relationships with advisors, we hope that you find the Guide helpful— whether you use the Guide as it is or as a starting point to create your own resource.

Retirement plans have the best result when serviced by a team of dedicated specialists, and those
teams work best when they work together. As I noted above, there is an obvious synergy between TPAs and advisors, but even with that synergy, the relationship has much room for improvement. Creating and utilizing tools to select quality partners and to assign and monitor responsibilities among those partners requires effort, but it also establishes accountability, removes surprises, develops trust, and builds strong partnerships.

As Henry Ford said, “If everyone is moving forward together, then success takes care of itself.”

ROLE "PLAY"

Perhaps the most important aspect of working together as a team is not only knowing what needs to be done, but knowing who is going to do “it.” The list and role identification that follows won’t be applicable in every case – but is presented as a sample template that could, and likely should, be part of every customer engagement.

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