Who Let The Fox In The Hen House?

No one intentionally lets the fox in the hen house.  The fox is sneaky, the hens are busy laying eggs and the farmer has a million things on his mind.  And then disaster strikes.

In the 401(k) industry the story goes like this:

A broker/salesperson sells a busy business owner a 401(k) plan.  The cost looks cheap and the adviser promises to “help” the workforce.  What most CEO’s fail to realize is that the 401(k) plan is cheap because it is a loss leader for that broker.  Most brokers make their money selling other financial products like annuities and insurance to that workforce.  The 401(k) is just a way to get their foot in the door.  And because the boss opened that door and invited them in to the chicken coop, they prowl around freely.  Everyone trusts the boss and therefor the fox, and no one suspects anything.

At some point a few wise birds will sense a problem because the fox only seems interested in the plump (rich/better paid) chickens.  All the rest of the coop is just a distraction to him.  They will hear something like this when they call with a question:  “The broker is in a meeting right now but maybe young Danny (the brokers understudy) could help you instead.”

And then it happens.  One of the employees gets bad advice on company property on company time.    Who (besides the broker whoose firm has fancy lawyers) will the attornies blame?

Business owners need to be mindful of who they let into the chicken coop.  Ask how they get paid.  How much of their revenue is from 401(k) sales?  Insurance?  Annuities?  Ask and speak to references.  A little due diligence up front will save a lot of hassle in the long run.