Publication: 401(k) Advisor
Date/Volume/Issue: January 2020/Volume 27, No. 1
Q&A: Service Provider’s New Year’s Resolutions
Ilene H. Ferenczy, Esq.
Mary J. Giganti, Esq. interviewed Ilene H. Ferenczy, JD., CPC, APA, Managing Partner of Ferenczy Benefits Law Center, who shared many tips and ideas for the New Year. Mary J. Giganti is an attorney with Waldheger Coyne in Cleveland, Ohio. She can be reached at 440- 835-0600 or firstname.lastname@example.org.
Q A new year is a chance to reflect on the past year and look forward to the new year. In the coming year, what are some ways to improve client relationship?
A 1) Yes, you should take a fresh look at your form letters, specifically for their readability and understandability. Form letters can be a good source of communication if they are easily understood by your client. You should make sure the form letters contain clear language and are written for people who are not in our industry. If a letter is long, consider an executive summary at the beginning, with bullet points of key items.
2) Consider sending a short note to your clients as they begin their new year, reminding them to keep you informed of any potential significant changes including sale of the business or change in ownership. If they discuss this with you before the transaction, you can assist with planning. Let them know that there are many planning opportunities prior to a sale; but after a sale, the planning opportunities disappear.
Remind them that if they want to save on taxes prior to year end, to discuss options with you during the year when they can plan and make changes. This short note keeps you in front of your clients, provides clients good and valuable information and shows that you are an indispensable team member looking out for their best interests.
3) At the beginning of the year, provide your clients with a calendar of key dates throughout the year. The calendar can contain legal deadlines as well as time when data requests will be sent and when they are due back. This provides useful information, helps clients manage workflow and data requests, and lets clients know you are working year-round on their plan.
4) Consider providing your clients with a phone tree of who to call for what types of questions. For example, investment options or allocations should be directed to the investment advisor, general administrative questions should be directed to the client contact at the TPA, and for more complex administrative questions, to the manager at the TPA firm. This is useful information that clients find invaluable to have at their fingertips so their questions are directed to the correct party.
Q Do you have any suggestions to improve how we ask for year-end testing information?
A Yes, you can help your clients immensely by educating them on what information you need. For example, when you ask for compensation information, explain to them exactly what you mean by compensation (plan definition) and where they can find the information (i.e., Form W-2, boxes “x” and “y”). You should provide this type of information at the start of the client relationship, and annual reminders are also helpful, especially if someone new at the client’s office is completing this information.
You can also explain rehires and the specific information you need for rehires. You could also provide a webcast tutorial for clients explaining the type of information you need and where to find this information.
You could also provide a webcast tutorial for clients explaining the type of information you need and where to find this information.
Q After the year-end testing is complete, many times we have difficult discussions with clients about refunds to highly compensated employees. Do you have any advice on how to handle these discussions?
A No one likes to have a hard conversation. However, the approach that has worked best for me is to just “tear the band-aid off.” What I mean by this is to give the information in a straight-forward fashion. Then provide information and suggestions how this undesired result can be avoided. For example, we could conduct preliminary testing prior to year end, suggest strategies to increase deferrals of other employees or implement a safe harbor. Clients appreciate the straight-forward information and options to solve the problem, Make sure your employees are well trained for client relationships and communications. Do not leave your employees un-equipped to handle potentially difficult discussions. Give them tools and practice. Employees should have empathy and be able to communicate with all types of clients. As an example, young employees may not have the same sense of urgency with their retirement balance as a highly compensated employee who is five or ten years away from retirement, when deferrals are refunded from their 401(k) account, This is where training of your employees is critical so that they understand why the client may be upset upon receiving the refund.
Q Do you have any suggestions to increase and find new business for the coming year?
A First, you should review and determine where you receive your clients; who are your referral sources? Then reach out to those referral sources and talk with them about how you can help them with the clients. For example, if your referral source is a financial advisor, when yon obtain the client information initially and onboard their information, how can you process this information so that it is also helpful and useful for the financial advisor? Additionally, financial advisors like to be in the loop and know about issues concerning the administration. Communicating with the financial advisors keeps them involved and informed so that when they meet with the client and participants, they know what is going on. If it is a CPA, how can you provide information and by when to get them information for tax planning purposes?
Q Do you have other advice for what service providers should be doing at the start of every year?
A Yes, you should take a fresh look at your E&O insurance policy. Review the policy to know (1) what is your deductible, (2) what is covered, and (3) how to preserve coverage. Our firm works with many service providers when they have compliance issues. Many times it is too late in the situation for us to provide this critical advice: to know your E&O insurance policy. For example, earlier this year, we consulted with a TPA on a correction. When they inquired about the E&O insurance, they discovered that since they were affiliated with an accounting firm, the deductible was not specific to plan administration services but for the firm as a whole, and the deductible was $250,000. We also reviewed a correction where insurance was not provided because the claim was not first reported when the TPA was made aware of the potential issue. These are all critical pieces of information that not only the owners but employees should know.
This is also a good time to review your service agreement. We continually update service agreements for TPAs. As the industry changes, your service agreement should also change. You should annually review your service agreement and update as needed. For example, we have included cybersecurity language in our service agreements. If you do not have cybersecurity provisions in your service agreement, it is time to update.
This is also a good time to look backward at the 2019 year and review any problems or difficult situations. You should review why it became a problem or it was difficult and how you could make it a better experience or better outcome and then take steps to ensure that the future is different.
Q If one of our resolutions is to increase communications, do you have any suggestions how to increase client communications?
A Yes, we are in a service industry where there is value to hear someone’s voice, to hear empathy and concern. While email is efficient and we are able to send and read it at any time, it should not be our sole method of communication. In a service industry, you need to build relationships which should be done on a personal level. Also, if someone does not understand the email or it takes more than two or three emails to discuss an issue, it’s time to pick up the phone.
Q Are there any resolutions you would suggest for a service firm?
A Yes, you cannot over-emphasize education. Education is important for individuals starting in the industry as well as continuing education for those established in the industry. Training is also important to handle client relationships and the firm’s systems. Having good oversight and work checked is also important in our industry, especially distributions, which have a high level of liability exposure. You should make sure that information is available to all your staff. Having all your employees highly educated is important. There are many ways to educate your employees, including exam programs through ASPPA, NIPA, or CEBS, webcasts, conferences, books, and other learning programs. You want to instill an atmosphere of learning.
Annually, we strategically plan for our company. We hold a retreat where we discuss and establish goals, review this year versus last year, and discuss benefits. This gives our leaders and employees a renewed sense of direction and helps everyone understand what we are trying to do. We have conducted the retreats ourselves and have brought in facilitators when needed. With a strategic plan, we plan for the year with a theme, determine what role each person will play, discuss initiatives for the year, and assign roles and deadlines for those initiatives. Throughout the year, we hold each other accountable for the plan. It is also important to not only look from year-to-year but more long range and where your business will be in the future. This type of planning is important to your referral sources to know that you have a long-range vision and plan in place to continue to provide services to your mutual clients.
Ilene, thank you for the great tips and suggestions, We wish everyone a prosperous 2020.
- Posted by Ferenczy Benefits Law Center
- On January 15, 2020