It may seem strange for the person who coined the term “blind squirrel” to explain not only why blind squirrels are here to stay, but also why they are helpful and even important to the entire DC plan ecosystem.
Some might say that plan sponsors and participants would be much better off if every plan had an experienced plan advisor who is willing and able to act as a co-fiduciary. Though 50% of new plan sales are sold by experienced plan advisors (and a greater percentage when measured by assets), nearly 75% of all advisor-sold plans are still represented by an advisor with fewer than five plans under management. That percentage will never go below 50% of all plans, which is actually good for the market. Here’s why.
• Without blind squirrels, who would serve those smaller plans that are no longer of interest to experienced plan advisors — especially if states start mandating that all employers of a certain size must have a payroll deduction retirement plan?
• For many employers, using an advisor they know and trust is more important than hiring one they don’t know, even if they can’t recite ERISA chapter and verse.
• Most plan advisors start with smaller plans. As their practice matures, they move up-market. Without blind squirrels, where is the next generation of plan advisors going to come from? Do you think advisors are born with five or more plans under management? Though the industry has better education programs and teams are forming that provide the necessary training, most advisors will build practices on their own with the help, primarily, of their local record keeping wholesalers.
So while it might sound righteous to say the DC industry is better off without blind squirrel plan advisors, think again about the realities of the world we live in — and remember the importance of the “nirvana fallacy”: We should not let perfection be the enemy of good.
