IN CASE YOU have not noticed, more and more providers are working with and through TPAs.  This trend is important for advisors because those who understand the inherent value of working with a TPA will be better positioned to build, grow and service their retirement practice.

There are two basic types of TPA models – 1. Those that do not perform their own record keeping using providers like Hancock and Nationwide; and 2. Those that perform their own record keeping using either SunGard, DST, Schwab, ExpertPlan or BenefitStreet.  There are hybrids like RSM McGladrey and Alliance Benefit Group who do both generally using larger providers to perform record keeping for smaller plans.  Record-keeping TPAs (RK/TPAs) trade through Schwab, Fidelity, TD Ameritrade, Matrix, AST or direct through the NSCC offering a greater choice of investments than TPAs that do not perform their own record keeping.  Costs are generally lower and more transparent for RK/TPAs plans and they are more friendly to RIAs.  Some TPAs sell direct, through advisors or both. 

Other values of working with TPAs include:

• Flexible plan design which means creating a plan to allow the highly compensated employees or business owners to put more money away;
• Local professionals able to answer questions and help with closing as the technical partner;
• Principals that stand behind their work; and
• Ability to make adjustments as a sponsor’s plan or business changes.

The challenges of working with RK/TPAs include:

• Less robust technology than the mega-providers
• Less sales support

Some advisors are reluctant to work with TPAs that sell direct but most will work with and respect the advisor and their business if they have clearly defined rules.  With non-RK/TPAs, some advisors complain that there is no one “throat to choke” when problems arise.  Finally, it is not obvious that mid-market plans ($10-$100 million) have adopted the TPA model – certainly TPAs in the larger market are rare.

Advisors need to find good TPA partners in their area to help them build, grow and service their business.  Sources include the wholesalers from the larger providers, referrals from other advisors, and 401kExchange which recently launched a TPA Corner (insert link) which includes mostly non-RK/TPAs but all that do not sell direct.  Regardless of the source, advisors without a TPA partner are at a severe disadvantage and should start looking now.  Finally, it might be wise to have more than one partner in case something blows up or the TPA is sold.

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