What do you do when one of your favorite TV shows skewers one of your favorite vendors?

 

I remember 20+ years ago my disbelief when one of the consumer research magazines looked into industries I had an intimate knowledge of. I wasn’t surprised then that they got a few things wrong. I guess the same should be true now.

 

The problem with John Oliver’s piece was that I don’t think anything was factually wrong. It just wasn’t very helpful and didn’t put into context the facts of the case. yes. Mr. Oliver is an extremely funny comedian who does a pretty good job of investigative journalism. But I think he left a couple of facts out for the sake of good television.

 

Dear reader, my comments are not a blind defense of John Hancock. I think that what John Oliver said was equally inapplicable to all of the major vendors. This is meant as a defense of them and our industry as a whole.

 

There are two primary items that John didn’t mention when he was referencing the other John. The first one is that 169 basis points on zero dollars isn’t a whole lot of money. The plan didn’t start with $6.3 million (35 employees contributing $6,000 for 30 years). Assuming there’s $100,000 in the plan after 1 year that’s only $1,960 in fees. An awful lot of work is done for that first $1,690. The second point is that they get to move the plan if John Hancock is getting the job done. How many plans are out there with the same vendor after 30 years with the same fee schedule? Can anybody name one?

 

I think the bottom line is that any publicity is good publicity. He did get people to think about 401(k) plans a bit more critically, if only for a brief time.

 

Speaking of thinking about 401(k) plans critically - We recently were able to help an employer determine optimal compensation and to decide whether or not a Simple of 401(k) were the best alternative. Their original compensation with a Simple plan would have only allowed the 2 owners to have a $29,000 aggregate allocation. Our work showed that they could afford a slightly higher W2 amount and increase their combined contribution to $112,000. I think that’s a pretty good alternative, don’t you?