Industry Leader Interview, with Michelle Marsh, Chief Visionary Officer, Retirement Plan Concepts & Services
Dawn Hynes Question:
Another thing I hear from TPAs is that they are getting pressed to reduce their fees. Advisors and record keepers are pressing them, but they are being asked to do more and more work. How are you addressing the profitability challenge? What do you think of that for our industry as a whole, in terms of TPA profit margin pressure? What do you think is going to be required for TPAs to break through and operate profitably in the coming days and months?
Michelle Marsh Answer:
I think one thing, which I have done from day one and actually three years prior to day 1 of my own business is that we track our time. We track every 6 minutes and it goes into a time tracking system so at the end of whatever time frame, I know exactly how much time we have spent on a client, what we are charging them and what the expense of our time was. So, I think we all know what you don’t measure you don’t know.
I came from a trust company where they didn’t track time. I would go to them and say “we can’t be making any money on this client because it is taking too much time”. They just never really cared. It was a bank relationship, too bad you got to do the work. So, when I left that I knew I wanted profitable clients. The best method for me was to know how much time and what the expense of that time looks like. As business owners we should all know that you need fully loaded expense. Then track the work and see where you are. When I am not profitable on a client and it’s clear by year 3, if we aren’t turning a decent profit, I am picking up the phone and having a conversation with that client. We’re saying “look you know we’re getting bad data, this either will have to change or we will have to charge you more”.
I think many TPAs are too afraid to say I need to charge you for the work I am doing. Unfortunately, I think our voice is overshadowed by advisors at times, they will sometimes argue. I think talking to the client directly saying “here is the price I’m charging you and here’s the time we spent”. We are all in this business to be profitable. You want your business to be profitable, I can’t run at a deficit. Either we need to modify your pricing or we’re not going to be a good fit for each other.
I make them all aware of the ways they can pay their fees. Not that I like reducing someone’s retirement account, but at the same time I don’t like not getting paid. If I need to go to forfeitures or if I need to a pro rata allocation against account balances. I make them aware that if they can’t write a check that there’s ways to get me paid. Also, we do adhere to what’s in our service agreement and that is more about collections but if a client becomes 90 days in arrears, then we suspend our services. I’ve made four phone calls this week saying “you’re not getting your 5500 next Friday unless you pay your bill”.