Managing Multiple 403(b) Vendors - There is no such thing as perfection By: Aaron FriedmanEA

Inevitably, something will go wrong.  It’s just the nature of life: things break; people make mistakes.  The mark of any vendor relationship is not an absence of problems, but a question of how quickly the inevitable problems are solved to the customer’s satisfaction.  I note that when I look up a business on the Better Business Bureau site. I’m much more comfortable seeing a complaint that is resolved than seeing no report whatsoever.

I’ve seen 403(b) provider arrangements, though, where the level of service and problem resolution are not a top priority. Certainly, advisors are necessary to serve as the advocate to go to bat for their client.  However, what about plan sponsors with multiple 403(b) service-provider arrangements?   Can the advisor effectively go to bat for the client if there are multiple providers?  It is no secret that most providers make money on money.


  • The more money the client has with the provider, the better service they are going to get.
  • The more money per participant that is in the client plan, the better the service.

Single Versus Multiple Advisors

If the plan has a single advisor, then it is likely one of two scenarios. Either the advisor has recommended multiple providers, or the advisor has recommended a single provider, but due to contractual restrictions with a discontinued provider, legacy-plan assets exist with that discontinued provider.  In either of these situations, the question is how much influence does the advisor really have with each of the providers when each participant’s plan assets are diluted across multiple providers?  Even if the advisor has influence with the current provider, how much influence can really be exerted on a discontinued provider when the inevitable problem arises?

Multiple Providers and Multiple Advisors

Another possible scenario is multiple providers and multiple advisors. This could even extend to multiple-advisors for each of the multiple-providers.  Then the question is simply whether anybody has any influence to go to bat for the client with any provider?

Comments I’ve received have challenged the concept of single provider versus multiple-provider arrangements. The advocates for multiple-provider arrangements talk about the benefits of more choice and maintaining individual advisor relationships.  The fact of the matter, though, is that most single providers have adequate choices available to participants today.  In addition, I’m a strong supporter of individual advisors.  I personally employ one.  However, that isn’t the best model for a retirement plan.  Those with advisors are mostly well taken care of.  Those without are not, and, unfortunately, in multiple-provider arrangements, there are usually too many without.  Finally, multiple providers cause the dilution discussed above, which makes it harder to get top-service priority from the service providers.

These are important questions for 403(b) plan fiduciaries to consider in evaluating an approach for the retirement plan, as they aren’t always readily apparent. 


Affiliation Disclosure

The subject matter in this communication is provided with the understanding that Principal® is not rendering legal, accounting, or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements.

No investment strategy, such as diversification or asset allocation, can guarantee a profit or protect against loss in periods of declining value.  Insurance products and plan administrative services are provided by Principal Life Insurance Company, a member of the Principal Financial Group® (Principal®), Des Moines, IA 50392.




Aaron Friedman

Aaron Friedman is an Enrolled Actuary and the National Practice Leader for tax-exempt business with Principal Financial Group®. He has consulted with tax-exempt organizations for over 20 years and is a nationally known writer and speaker on tax-exempt plan sponsor topics.

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