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Should I Purchase TPA/Record Keeper?


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I own a small RIA firm in Michigan.  The majority of our assets under management are in 401(k) and 401(k)/Cash Balance combo plans.  Similar plan provisions, model portfolios, and fund lineups.  We also have an accounting/tax division with large overlap of our retirement plan clients.  I've explored the MEP/PEP structure a few times over the past few years.  Theoretically, it should be a great solution for a book of business like ours, however, I can't seem to make the fees or operations in a MEP/PEP structure materially better than our current set-up.  I'm thinking of trying to buy a small TPA and Record Keeper that would mainly serve clients within the RIA.  My hope would be that I could reduce price and streamline operations since so many of our plan are similar, and pass these savings along to clients reducing administrative fees.  Has anyone ever done anything like this, or know of any small firms that might be a good target for acquisition?   

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Speaking from personal experience, starting and running a TPA and/or recordkeeping business takes a tremendous amount of work and expertise. It is not something to just "dabble" in. Furthermore, an unbundled platform (separate FA and TPA/RK) has many merits and the main thing we promote is that the client gets an expert in each field instead of a "jack of all trades - master of none".

I would suggest you consider a small to mid-size TPA/RK (where you are a big fish in a smaller pond for the personal attention) that is specifically non-producing (they don't compete with you at all). Send me a PM and we can discuss further.

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A couple of thoughts on this:

1.  Are your existing plans concentrated with one or 2 TPA's or spread over many providers?  Per Gadgetfreak, you might get better pricing by better "partnering".

2.  The new MEP/PEP rules are very new and came out just as Covid caused major business disruption.  For many in the TPA business, maintaining existing service levels was probably very challenging and deemed more important than development of a MEP/PEP product.

Unless you're hemorrhaging retirement plan clients  I'd wait to see what MEP/PEP solutions become available over the next 12-18 months, rather than investing the time and money in adding a new department to your organization.

3.  Did you see Michael Kitces' recent piece on this - https://www.kitces.com/blog/pooled-multi-employer-plan-pep-mep-401k-secure-act-small-business-employer-sponsored-retimrement-plan-pooled-plan-provider/ ?

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  • 2 months later...

I have a very small TPA firm, and I do not sell any investments at all.  Something you may consider is partnering with one of your client's TPAs whom you already have a relationship with, as Retired mentioned in his #1.  I am the "back office" for an accounting firm. The way it works is - the CPA maintains the relationship with the clients, and I do all the firms' TPA work.  I bill the CPA firm, not the client.  (They are able to bill their client whatever they choose.)  I discount my regular fees to the CPA firm because of the volume of business AND the fact that I have no contact with the clients.  We all win!  I have this block of business, and the CPA firm is able to offer this awesome service to their clietns without having to either add an employee and/or educate that employee.  As was mentioned before, this is not an easy skillset to take on.

I only give this as food for thought.  I, for one, would love the opportunity to be the "back office" for a firm such as yours.  Maybe one of the TPAs you already work with would too!  Good luck.

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