Q – What are the main mistakes in the vendor selection process?
Matthew Gnabasik in book “Smart Choices: Selecting and Administering A Safe 401(k) Plan” offers the following advice on mistakes to avoid in the vendor selection process.
The 401kHelpCenter.com site has paraphrased some of them.
- Not Asking Enough Tough Questions: You decide to ask for help in the search process and turn to a broker or consultant. If you do so, be sure you ask them plenty of tough questions about their qualifications to help you and if they have any conflicts of interest. Do they have their own product that they want to push on you?
- Not Shopping Around: The 401k marketplace is very competitive and product offerings vary greatly. It pays to shop around. Remember, selecting your vendor is a serious fiduciary obligation.
- Confusing Sales People with Consultants: Most 401k vendors distribute their product through an in-house sales force, and these salespeople are often quite good at their job, which is selling products. Be careful about relying on them too much for objective information.
- Reducing the Buying Decision to Only Cost: Cost should never be your primary decision element, even though it is an important part of the buying decision. Basing your selection simply on who has the lowest cost is short-sighted and may have long-lasting negative repercussions.