A plan provider once asked me if I had written a comprehensive article on why trustee-directed 401(k) plans are superior to participant-directed plans. Although I believe in this argument, I haven’t actually written such an article. I don’t think it would attract much attention, as people have been conditioned over the last 25 years to favor participant-directed plans. Trustee-directed plans have several advantages over participant-directed plans, with the primary benefit being that trustees are generally better equipped to make investment decisions than participants. This is often the case.
However, the situation is reminiscent of how Betamax was a superior VCR compared to VHS. Ultimately, it didn’t matter because the public overwhelmingly chose VHS for various reasons, such as the fact that multiple manufacturers produced VHS, while only Sony made Betamax, and Betamax originally had a shorter recording time of just 60 minutes. To succeed in this industry, it is crucial to understand what the client wants. Don’t focus on multiple employer plans if the public is leaning toward pooled employer plans, or the other way around. Flexibility is key to success; stubbornness won’t help anyone.
