Physician, heal thyself. Advisor, advise thyself – Carosa

There’s an old joke about a town with two barbers – a perfectly clean-shaven one in a meticulously maintained salon, and a disheveled one in a messy barber shop. Which one do you go to? The disheveled one, because he’s the one that gave the clean-shaven barber his perfect haircut.

Financial professionals who specialize in retirement plans might rely on a third party to set up their plan, but they don’t need to. In fact, they shouldn’t.

If you don’t have the confidence in your own knowledge to establish your firm’s retirement plan, what makes you think another company will trust you to design theirs?

You must lead by example. This is very similar to the way parents can best teach their kids (see Step # 2 in “7 Steps to Teach Your Child Good Financial Habits,” FiduciaryNews.com, June 19, 2018).

In fact, isn’t the relationship between the retirement plan expert and the plan sponsor similar to that of a parent and a child? Just as the child doesn’t know the first thing (and often could care less) about money and finance, the typical plan sponsor doesn’t know the first thing (and often could care less) about employer-sponsored retirement plans. Sure, plan sponsors say they’re interested, but how deep can they afford to go down the rabbit hole of ERISA? That’s the professional’s job.

Without crossing the line into being patronizing, the retirement plan professional must explain, demonstrate, guide, and enable plan sponsors when it comes to their retirement plan.

Leading by example falls under the “demonstrate” category. You can talk a great game (“explain”), be great at providing comfort and holding hands (“guide”) and know when it’s best to keep your own hands off (“enable”), but unless you can show how you do it yourself (“demonstrate”), the entire house of cards can collapse.

Think about the thought process you went through when you selected your own retirement plan. The resulting plan may not be exactly the same as what the client requires, but the process contains many useful and instructive similarities.

For example, you begin with the same basic assumptions. These assumptions often include reducing corporate taxes and building employee retirement assets. Again, the solutions may be different, but the path towards those solutions remains remarkably similar. It’s not until the very end that it diverges.

Sharing the experience of journeying down the same path builds a rapport between the professional and the plan sponsor. With that rapport comes greater trust. More important, the plan sponsor sees the professional not merely as a vendor, but as a kindred soul, and that brings greater credibility.

There is another valuable benefit from showing the plan sponsor the professional’s retirement plan. In addition to similar basic assumptions, there are similar basic benchmarks to success. These can include both participation rates and deferral percentages. Professionals who can show their plans meet and exceed these benchmarks move one step closer to convincing the plan sponsor they can do the same for the plan sponsor.

Finally, leading by example stands out as the ultimate fiduciary duty. Think of it as “doing unto others as you would do unto yourself.”

Said another way, “If you don’t eat your own cooking, why would anyone else eat it?”