Watch the YouTube version of this episode HERE

What if your law firm’s 401(k) is quietly costing you tens of thousands of dollars each year?

In this episode, Tyson talks with Paul Sippil, also known as the 401(k) Vigilante, about the hidden fees and confusing payment structures built into many retirement plans.

Paul explains how he reviews publicly available Form 5500 filings to determine what firms are paying for recordkeeping, administration, custodial services, and financial advice. He also shares why two firms with the same number of employees can pay drastically different fees simply because one plan has accumulated more assets.

In this episode, we dive into:

• Why many firm owners do not know who their 401(k) advisor is, or what that advisor actually does
• How asset-based fees can cause a successful firm to pay more without receiving additional service
• Why Paul believes every retirement-plan provider should send a clear invoice
• Which 401(k) fees may be negotiable or eliminated
• How excessive fees can affect both law firm partners and employees
• What attorneys should know about the ABA retirement program
• The shocking story of a company that paid nearly $49,000 in commissions while its listed advisor had been dead since 2014

Paul also shares practical questions law firm owners can ask their providers to better understand their plans, uncover unnecessary costs, and determine whether they are actually receiving the services they are paying for.

Timestamps

01:14 — What a forensic 401(k) consultant does
04:34 — Why many owners do not know who their advisor is
09:28 — Why every provider should send an invoice
12:19 — The problem with asset-based fees
13:38 — Why nearly every 401(k) fee is negotiable
15:31 — How small law firms can pay up to $50,000 a year in fees
19:09 — The ABA retirement-plan option for law firms
24:11 — Making hidden participant fees visible
31:43 — Could AI disrupt the retirement-plan industry?
34:06 — The company paying an advisor who had been dead since 2014
41:45 — Alternative approaches to health insurance and employee benefits

If you own a law firm and have not reviewed your retirement-plan fees recently, this episode will help you understand what to look for, what questions to ask, and where your firm may be overpaying.

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Full Transcript: 

Tyson Mutrux (00:17)
All right, Paul, so you go by the four one K vigilante. I think that starting with the nickname is the great place to start. So what is that? What does that mean?

Paul Sippil (00:17)
Vigilante, I think, is a really good term because it describes someone that isn't willing to simply accept what the system presents. you sometimes have to take things into your own hands. Of course I mean legally. True. But not necessarily accepting the status quo. And everything I do and

Paul Sippil (00:46)
really it reflects the way I think, is very much in the spirit of challenging the way the system works and asking deeper questions and looking at patterns and taking both fifty thousand foot view and a granular view at the same time and not being able to say something is wrong and how could things be done better.

Tyson Mutrux (00:46)
So you you're big into the forensic side of the four a wake four one K

Tyson Mutrux (01:14)
Realm, I guess is what you'd call it. You you said you were talking about how the more accurate definition might be a little so we would talk about that because I want to give people an idea as to what you do. Sure, yeah.

Paul Sippil (01:14)
And it's not not the easiest thing to describe because there really isn't a category for this. I've been for the last several years trying to explain just what this category is, what exactly is, and I've often described myself also as a forensic 401k consultant and what does that really mean? A lot of people have heard of forensic accounting.

Paul Sippil (01:43)
And forensic accountants are often used in court for expert witness testimony, for business valuations whenever there's a dispute on certain facts or values of what a business is for divorce cases, and there's a clear market for forensic accountants. I also happen to be a CPA, recovering CPA, but forensic 401k consulting is not something anybody has ever talked about before. And I call it that because

Paul Sippil (02:09)
So much of what I do is based on reviewing publicly available tax filings and going through what's known as Form 5500 and looking at the entire makeup of the plan, the assets, the contributions, namely the service charges that show up. And this is how I know very quickly by looking at a 401k plan tax form, looking at both the employer and the employee contributions, the plan assets, and the service charges, namely in proportion, not to the asset so much.

Paul Sippil (02:39)
as in proportion to the number of participants, I can very quickly tell whether the services are commensurate with the level of work the or the fees charged for the services are actually commensurate with the level of work that's required.

Tyson Mutrux (02:39)
So let's say a company brings you in to to do what you do. Like what's the end goal? Is it to bring down costs or like what's the end goal of it?

Paul Sippil (02:39)
That's part of it, but it's a lot more than just bringing down costs.

Tyson Mutrux (02:39)
Okay.

Paul Sippil (02:39)
So we have to make sure

Paul Sippil (03:07)
To understand what these services are for and what would reasonable compensation actually be for these services. So to back up, just defining what the services are, which is a very rarely understood, are primarily known as record keeping, administration, and advisory services. And there's different types of advisors out there. And sometimes there are fees for what's called custodial services. Custodians are like Charles Schwab or Fidelity simply for holding the money if it's set up

Paul Sippil (03:36)
where there even is a custodian and on what's called group annuity plans there is no custodian. But it's primarily record keeping administration and advisory services. Nobody really knows what advisory services are because there's often an advisor that doesn't actually perform any services. The perception is the financial advisor is managing the account. However, these accounts are what's known as typically participant directed accounts. So if you ever had a 401k plan, you know typically you have 20, 30

Paul Sippil (04:05)
50, maybe a hundred funds to choose from, depending on the plan. And you just have to figure out which funds are best. The advisor doesn't make any buy sell decisions. The advisor doesn't control what you invest in. That's up to you. The advisor might help make a pool of twenty or thirty funds or so available, but it's not actually the advisor that's making those buy sell decisions. And in many cases, well over ninety percent of the participants don't even interact with the advisor.

Paul Sippil (04:34)
And don't even know that an advisor even exists.

Tyson Mutrux (04:34)
Well it's funny you say that because we have R four one K through Vanguard. I mean I don't know who our advisor is if we have one. Or if there is one. Yeah. So I have no idea who who it would be if there was one.

Paul Sippil (04:34)
Yes. And there's different ways advisors get paid. Now it's almost always automatically deducted from participants' accounts, regardless of whether or not the participants are even using the advisor's services or the owner, the plan sponsor, is even

Paul Sippil (04:59)
Using the advisor's services in terms of evaluating the other record keepers and administrators and custodians out there, and ensuring that their fees are reasonable and ensuring the advisors' fees are reasonable. Advisors don't send invoices, which is really crazy. So not only are they getting paid from participants' accounts, disclosing their fees not in dollars but in percentages, which is not a way to make employers more cost sensitive because

Paul Sippil (05:24)
Half a percent or one percent doesn't sound like much it's kind of brilliant because like I I know we just pay a set amount, it just comes out every single month, and I have zero idea what the fees are. No idea, no one really looks, nobody even understands there are fees, they don't know what reasonable fees are because if you don't even know what they are in the first place, how can you make reasonable comparisons?

Tyson Mutrux (05:24)
Sure. So what the advisor's actually supposed to do, and by the way, there are brokers who can only get paid a percentage of the account value

Paul Sippil (05:50)
Through these asset-based kickbacks known as commissions or sometimes called revenue sharing that are built into the cost of certain investments and not others. So there's a clear bias to only make certain funds available that ensure that the broker actually gets paid. The broker can only provide what's known as investment education, not actual advice. If you give me a hundred dollars, I tell you what to do.

Paul Sippil (06:15)
That's advice. If I sell you an investment and I get $100 in commissions, that's not advice. That's simply limiting me to providing what's known as educational services, not actually giving advice.

Tyson Mutrux (06:15)
So what the advisor should be doing is actually telling you what to invest in, telling the plan sponsor which funds to make available, helping you make distinctions between what's known as the Roth and traditional 401k. People think a Roth is an IRA, but a Roth has nothing to do with IRA or 401k.

Paul Sippil (06:44)
It simply means making contributions to a retirement account with after tax dollars, where you get the tax deduction or tax-free withdrawals on the back end and no tax deduction on the front end. That's what the advisor should be doing, along with helping people create a budget and helping determine how much to contribute, as well as using the retirement plan calculator on the record keepers website where you enter in all your data, your assets, the expected growth and inflation rate.

Paul Sippil (07:13)
And it spits out how much monthly income you'll have and it shows how much more or less monthly income you'll have as a result of, let's say, reducing or increasing your contributions. Advisors should ultimately be sitting down with participants on an individual basis and helping them make those decisions, but they almost never do. And the plan sponsor has no incentive to care if the services are being used because not only is the employer not paying for the services, but there's no invoice to reflect the participant fees.

Paul Sippil (07:41)
So there's no pain being felt. Kind of like people who don't have that pain mechanism where if you put your hand on a hot stove, the pain should be a warning because your hand is burning off. But imagine if you didn't feel pain and your hand was on a stove and you didn't even realize it was hot, you wouldn't even feel your hand burning. And that's not that bad of an analogy to not being able to feel the pain of the fees. So there's no incentive

Paul Sippil (08:04)
To reduce or negoti to negotiate or even eliminate the fees. You don't even have to pay an advisor, but people don't know that. There's also record keeping and administration fees. The record keeper, such as John Hancock, Fidelity Principal, simply keeps track of all the records, loans, provides a website, a customer service number for both the plan sponsor, the owner of the business, as well as the participants, should they have any questions about using the website. Then there's administration fees.

Paul Sippil (08:32)
Which have to do with preparing the tax form, known as Form 5500, as well as what's called discrimination testing, which are these stupid rules in place to ensure that the non-highly compensated employees are contributing enough in proportion to the highly compensated employees. If they don't, then you fail the tests and the highly comp compensated employees get what's called redemption checks at the end of the year. So they can't actually max out their contributions.

Paul Sippil (09:01)
unless there's sufficient participation amongst the non highly compensated employees or the employer makes a contribution on behalf of the employees like three percent, which is known as a safe harbor plan. So basically you have to pay a bunch of money to the employees just to make sure that the tests are being passed. I hope that wasn't too much information. No, it's a lot lots unpacked. I would say let me let me do this. Let's I'm gonna take a different approach. What would you say is your most

Paul Sippil (09:28)
Extreme view or extreme opinion on things. Well, that nobody should ever do business without sending an invoice, because nobody sends an invoice. The administrators sometimes send an invoice for some of their fees and they issue what's called a credit if they're receiving revenue sharing payments out of the funds. So if they're charging five hundred dollars and they received two hundred dollars in revenue sharing.

Paul Sippil (09:55)
Then they'll show a $200 credit, which makes it look like a discount. But it's not a discount. It just means that they're getting their fees somewhere else. And because nobody sends invoices, and because I've actually suggested to the Department of Labor, I've had conversations with them about changing their policies. And instead of mandating a fee disclosure document that nobody knows exists, or if they do know it exists, they don't understand, and it's not even clearly disclosing all the fees.

Paul Sippil (10:21)
Why don't you mandate invoices instead? And I don't love mandates, but that would be a more logical mandate. And voluntarily I would suggest that everyone send an invoice with a description of their services, which would change the entire industry overnight. I know it's not extreme to me, but other people think so.

Tyson Mutrux (10:21)
So let's say it's as you're a business owner, right? You're you're you're doing the three percent, you're you've got a four hundred one K that you o the you ha have for your business. We'll use law firms, right? Sure.

Tyson Mutrux (10:49)
So you got a law firm, you're running a a four one K, you're doing it through like what's one of the biggest companies that does four one Ks for other companies? well like principal or Fidelity or big record keeping. Let's use ph let's use Fidelity. So Fidelity, they're they're administering the four one K. Is that the right terminology? yeah, record keeping administering the four one K. so the law firm is not let's just call it Smith and Smith. Smith and Smith is they're never getting an invoice, it's just getting, you know, they're paying every single month what they're paying

Tyson Mutrux (11:19)
The employees are contributing what they're contributing. I guess in that situation, there's never are you suggesting that the business, the law firm Smith and Smith should reach out to Fidelity, or are you saying Fidelity needs to start d sending invoices to the law firm? I'm actually suggesting both. And let me add something, and this is especially relevant for law firms.

Paul Sippil (11:19)
Fidelity typically earns its money through asset based fees, specifically

Paul Sippil (11:48)
Kickbacks known as revenue sharing payments built into the cost of certain funds and not others. Sometimes they can simply assess what's called an asset charge where they don't get kickbacks, but it's still a percentage of the account. Many law firms have lots of money because law firms are there's lots of profitable law firms out there and lots of law firms have been around a while. Imagine a law firm with 20 participants with $1 million versus another law firm with 20 participants and $5 million.

Tyson Mutrux (11:48)
Which one requires more work?

Paul Sippil (12:19)
Probably the I would assume the five million, but may I'm I'm guessing you're gonna tell me the one million dollar one? Neither. There isn't more work. the same amount of work.

Tyson Mutrux (12:19)
Okay.

Paul Sippil (12:19)
Because twenty participants is what drives the work, not the assets. The assets have no bearing whatsoever on the level of services required. So it would be foolish for any company, law firm or any kind of business, to enter into an arrangement and

Paul Sippil (12:45)
Where the service charges are based on a percentage of the total account value if there is a significant account value and if there are significant contributions. You don't want to be charged based on five million and essentially paying a huge penalty for your own success when there are other very comparable and reputable companies who charge based on not the assets, but on the number of participants.

Tyson Mutrux (13:11)
Stay on this for a second because this is really this is really important. Okay. So Smith and Smith, so they've they've contracted with Fidelity.

Paul Sippil (13:11)
Yes.

Tyson Mutrux (13:11)
I guess this is like kind of like a two part question. based on that. So we we don't want to be paying them a a percentage of the overall assets, right? Can I negotiate that with Fidelity or if I i is my only option to go with another company?

Paul Sippil (13:11)
Both.

Tyson Mutrux (13:11)
Okay.

Paul Sippil (13:11)
You can go with another company.

Paul Sippil (13:38)
so no, it's not your only option. You absolutely can negotiate with Fidelity.

Tyson Mutrux (13:38)
Okay, because I did not know that.

Paul Sippil (13:38)
And that's one of the biggest points.

Tyson Mutrux (13:38)
So you stole my idea. That was a great point because I was gonna mention that. Or you actually helped me remember so I don't forget to mention, but every fee is negotiable. Every fee. Everything. And because people don't have an invoice, it doesn't occur to them to negotiate.

Paul Sippil (13:38)
Oftentimes you can negotiate a lower percentage.

Paul Sippil (14:05)
They might agree to a fixed fee structure, but their fees are still going to be based primarily on the assets. They're just going to go up as the assets go up. You can also negotiate with the advisor and you can eliminate the advisor's payment entirely if you're not using an advisor. And it's actually much more dangerous from a fiduciary liability standpoint to pay exorbitant fees to an advisor whose services are not or are hardly being used by participants because then you're passing on excessive fees to participants.

Paul Sippil (14:35)
Than not having an advisor at all, because the question often is don't I need an advisor helping me? Well, yes, if they're actually doing something, but you want to document the services they're performing and you want to make sure that the fees are reasonable. But having no advisor at all is actually much less precarious than having an advisor that's overcharging the participants for services that are hardly being used and not being documented. It's really interesting.

Tyson Mutrux (14:35)
Okay, so I mean, how much money are we talking? Are we talking about a significant amount of money? Okay, so let's say on the five million. Let's say that on the five million,

Tyson Mutrux (15:05)
If if we go from n having not negotiated anything to to negotiate like how much money are we saving a year?

Paul Sippil (15:05)
Well, there's many instances where there's plans I've seen and I actually have an Excel spreadsheet that I've documented.

Tyson Mutrux (15:05)
As a CPA, I would expect nothing else. Nothing else.

Paul Sippil (15:05)
I'm proud of this Excel spreadsheet because I've gone through tens of thousands of 5500 forms, the form file with the Department of Labor, and I have documentation going all the way back to 2009.

Paul Sippil (15:31)
Because these tax forms are matters of public record. And this is how I got into the business due to a conversation with one of my colleagues who told me you could look up the tax forms online.

Tyson Mutrux (15:31)
Wow.

Paul Sippil (15:31)
And I started documenting everything. And there are law firms with 10 or 20 people who are passing on expenses upwards of fifty thousand dollars per year. And here's the worst the most egregious example. I've even gotten to the most interesting part.

Tyson Mutrux (15:31)
Yeah.

Paul Sippil (15:31)
Most of the partners

Paul Sippil (15:58)
have most of the money in the plan. And these fees are actually passed on in proportion to the account balances. So if 90% of the money is the partner's money, guess who's paying 90% of the fees? The partners. But it actually gets worse. It's more interesting than this because the fees passed on to participants are not tax deductible. And even if they were, they still wouldn't even be known to be deducted because you can't deduct something that you never knew existed in the first place. Because it's all just wrapped into everything. You can't deduct a percentage. You have to

Paul Sippil (16:27)
Give a number on your tax forum as to what you paid. So ultimately you have to get down to the dollars. But it gets even more interesting than this. These are tax-advantaged accounts.

Tyson Mutrux (16:27)
So you don't want any money coming out of tax advantaged accounts. And again, you don't even get a tax deduction. And again, the partners are paying all the fees almost all personally anyway.

Paul Sippil (16:27)
Wouldn't it be better if they did, to your prior point in question, actually demand that both Fidelity or

Paul Sippil (16:54)
whoever provider they have as a record keeper and administrator and the financial advisor actually send them a bill. Not only would they be able to get a business tax deduction like they would any other business expense, because business expenses are deductible, but they would save everybody else significant amounts of money, make their plan more competitive. And I could even quantify the savings through a Department of Labor example showing how 1% additional in additional fees actually cost

Paul Sippil (17:19)
A participant with a small balance, about sixty-four thousand dollars over their investment lifetime over a thirty year period from thirty-five to sixty-five, ages thirty-five to sixty-five, which is about twenty-eight percent of the balance. But the law firm also would naturally be more sensitive to the cost because when you get a bill, you're naturally gonna scrutinize it more than when you have a fee deducted from the accounts without seeing an invoice and

Paul Sippil (17:44)
You would be much better off from a fiduciary liability standpoint to the extent that there are zero fees passed on to participants because there's essentially almost no liability when there's almost no fees. Not zero, but you would significantly mitigate it.

Tyson Mutrux (17:44)
So you say the form five fifty or fifty-five hundred?

Paul Sippil (17:44)
Five five hundred.

Tyson Mutrux (17:44)
Okay, form f it on the fifty-five hundred, it's not even separated by fees and everything like it was just one number, basically.

Paul Sippil (17:44)
Well, there's two several different line items. One of them is line

Paul Sippil (18:11)
8F on the short form and it's Schedule C on forms where there's over a hundred participants, where it shows the combined fees between the record keeper, custodian, administrator, and the financial advisor. So it's not it's not invoiced out. It's not broken down.

Tyson Mutrux (18:11)
Okay.

Paul Sippil (18:11)
It's not although the financial advisor's fees, if it's a broker, can show up on line ten E as commission payments. So sometimes you will or oftentimes you will see the broker's fees separately, but nobody

Paul Sippil (18:40)
Or very few people often look closely at that fifty five hundred form.

Tyson Mutrux (18:40)
So what I've done is send companies summaries going all the way back to two thousand nine.

Paul Sippil (18:40)
Here's your fees in two thousand nine, here's your fees, like showing them the dollars each year and the extreme escalation and how the number of participants often only increases a little bit or stays the same. And yet just because of the assets going up, I can show just by going through all the forms, which anyone can look up themselves but often don't, the

Paul Sippil (19:09)
Dollars paid out each year and that is extremely eye opening.

Tyson Mutrux (19:09)
Can you go retroactively and get your money back?

Paul Sippil (19:09)
No, you can't get your money back, but you can set it up in such a way so you if you're a law firm, you basically can avoid all those fees. This might be the most important part for any attorney that's listening to this, is the American Bar Association has a special program called the ABA retirement funds program.

Paul Sippil (19:33)
And if you set up what's called a self-directed brokerage account, which is an account where you can have literally any fund you want, you can avoid basically all of the advisory, record keeping, custodial, and administration fees, with the exception of non-recurring fees such as plan amendments, which are billed to the employer like a few hundred dollars a year, and something called cross-testing, which is a form

Paul Sippil (19:56)
Of disproportionately allocating the profit sharing contribution more to the highly compensated employees, which is very common amongst law firms, which is a separate one to $2,000 fee per year. But these fees are typically $40,000, $50 grand a year or more combined with the advisor and the record keeper and the administrator. It's administered by VoyA. And if you put your money in one of the core funds in the program, they have this revenue sharing built in.

Tyson Mutrux (19:56)
So you're stuck paying for those.

Paul Sippil (20:24)
Record keeping administration advisory services if you choose one of those limited funds. But if you put all of your money in the brokerage account, there are no advisory record keeping or administration fees. And if you have a financial advisor, that advisor has to bill the employer, which they should, and they can't make as much money that way, or they have to come to an individual agreement with each participant if they want to get money from their accounts, as opposed to 99% of the arrangements where the advisor gets an automatic fee.

Paul Sippil (20:53)
Based on a percentage that escalates from everyone's accounts, regardless of whether or not they even know that the advisor exists. The only restriction is you have to have a minimum of $2,500 in one of those core funds. And as of three years ago, the annual fee of $250,000, $250 per participant per year wa was waived that they otherwise would have had to pay if they set up a brokerage account. This is a

Paul Sippil (21:19)
Gold mine for law firms. I don't make any money off the program.

Tyson Mutrux (21:19)
Sure.

Paul Sippil (21:19)
I'm just letting attorneys know that they have that option. And every law firm, especially small law firms, if they understood how that program worked, should immediately take advantage of it.

Tyson Mutrux (21:19)
Okay. So I'm gonna ask you this question based on what you just said. how do you benefit from it then? I that's I'm very curious about that. I like what's how like where is your benefit? There's gotta be like something that you would get as the forensic.

Tyson Mutrux (21:47)
CPA.

Paul Sippil (21:47)
So I I nothing directly. It's brand awareness. I'm just being honest with people. And the question is, well, how do I benefit from being honest? Well, it's good for my reputation. It makes me feel good that all of my years of research and all of my work is actually being recognized. So there's I guess you call it an emotional benefit because when you work that hard to get information out there, you want people to actually take your advice.

Paul Sippil (22:15)
And of course, it's just good business. If any company out there wants to engage an advisor who actually sends invoices, who has a conversation about whether or not the employer would be better off paying the fees, and who charges in a way that's commensurate with the level of services provided, and goes further and takes the time to recommend administrators and record keepers and evaluates them not only in terms of services and technology, but also in terms of cost that's a fit based on the makeup of their.

Paul Sippil (22:45)
plan, then hey, they might want to talk to me. But sometimes what advi what companies do is just take my advice and use it to get a better arrangement with their existing providers like their advisor. Now I would wonder why they'd want to keep their advisor if they've been overcharging them all these years or if they've foregone the opportunity or didn't even tell them about the opportunity for the employer to pay the fees, which makes so much more sense for the reasons I stated. I'd be surprised if they would want to

Paul Sippil (23:13)
keep the advisor, but often they do. And then I'm happy that I help them get a better arrangement.

Tyson Mutrux (23:13)
Okay. So I'm gonna go back to something you said before. Let's say I do get an invoice. Let's say they they break it down for me. Sure. Is that tax deductible?

Paul Sippil (23:13)
Well, depending on what you mean, if you get it the invoice itself is just a means to show the fees. It's pretty much a receipt, essentially the the tax deduction has to do with whether or not the fees are paid by the participants.

Tyson Mutrux (23:13)
So you can't

Paul Sippil (23:42)
For individual participant fees, deduct those fees on your own return.

Tyson Mutrux (23:42)
What if it's broken down by what the cut it's cost the company?

Paul Sippil (23:42)
So now the company can deduct those fees if the company pays for it. Now, if the company is billed, you're n they they have to send you an invoice, so it'll be nice to get a description of services as well.

Tyson Mutrux (23:42)
Sure.

Paul Sippil (23:42)
But my major criticism is that it's even more important to get an invoice to show the fees and the dollar amounts for fees deducted from participants' accounts because that's where

Paul Sippil (24:11)
fees become so invisible because you don't see it when the employer isn't paying for it. And even though the fees aren't tax deductible at the participant level, if every plan sponsor who was passing fees on to the participants got an invoice with a s description of services where the advisor every single quarter would have to write that he or she did nothing because there might have been no participant interaction, then I think fees would go down drastically overnight because it would be in your face on a quarterly basis.

Paul Sippil (24:41)
And you couldn't avoid that whatever twenty, thirty thousand dollar annual fee or or ten, twenty thousand dollar quarterly fee that's being charged collectively or individually by the advisor and record keeper. Those are big numbers. And if you know that nobody's talking to the participants, or if you don't even know if the advisor services are being used, boy, it's kind of hard to keep looking at that ten thousand dollar quarterly fee and not asking the advisor what the heck is going on. What am I since I'm I mean

Tyson Mutrux (25:10)
This is all kind of blown my mind. I'm I'm I'm new to this topic. So what is something else I need to ask you about or that people should know? Cause I want to make sure because we don't like we're lawyers, we don't have the technical expertise. So sometimes we don't know the question that we need to ask. So what's another question you think I should ask you about this? Cause I wan I wanna make sure people get the most value. Cause I I sure you've already saved people thousands of dollars, tens of thousands of dollars.

Tyson Mutrux (25:35)
like what what else should I be asking? there there's a lot more too.

Paul Sippil (25:35)
But those are I mean those are the main points, but there's some other areas that are important too, such as are there any restrictions on on the investments I can choose? And there's multiple layers to this. If you only have twenty or thirty funds available, then that's all you can pick from. But oftentimes there are thousands of other choices available for the owner and or the advisor to potentially add

Paul Sippil (26:04)
To the what's called the default fund lineup.

Tyson Mutrux (26:04)
And am I getting any kind of discount because there's some kind of proprietary fund?

Paul Sippil (26:04)
Like principal and fidelity have their own funds. are we getting a deal on other services because we're investing in principal or fidelities funds?

Tyson Mutrux (26:04)
What if I don't want to invest in principal or fidelities funds? Do I have other options to do so?

Paul Sippil (26:04)
And that's where this brokerage account gets in comes into play, where you can have

Paul Sippil (26:33)
basically unlimited fund choices, and this is fairly common amongst law firms.

Tyson Mutrux (26:33)
And if we do have this brokerage account, do I have to pay like a $100 or $200 annual fee? Sure, that's not doesn't sound like much, but that actually does add up over time.

Paul Sippil (26:33)
And how does this program in terms of like quality of service compare to the American Bar Association's program? That's a very high-end program. It's just for attorneys and for firms who service law firms who are also eligible.

Tyson Mutrux (27:00)
do we can we integrate with payroll very easily?

Paul Sippil (27:00)
And this is fairly common. There's something called 180 and 360 payroll integration. And from an administration standpoint, the more integrated that your record keeping system is with your payroll company, the easier it is for the plan to be administered.

Tyson Mutrux (27:00)
Sure, I bet. Yeah. Yeah. so those are other things.

Paul Sippil (27:00)
And then what exactly is the advisor's expertise?

Tyson Mutrux (27:00)
What exactly is the advisor doing? If if I think the advisor is managing everything for me.

Tyson Mutrux (27:31)
what does managing actually entail?

Paul Sippil (27:31)
And I'll add something to your point. Ted Benna, you might have heard the name, he's the inventor of the 401k.

Tyson Mutrux (27:31)
Is he the Vanguard guy or is the that's John Bogle. Yeah, that's right. Okay.

Paul Sippil (27:31)
Yes.

Tyson Mutrux (27:31)
Yeah. So John, so when people say first of all their plan is with Vanguard, what they might mean is that the plan has primarily Vanguard funds.

Paul Sippil (27:31)
But that doesn't mean that Vanguard is the record keeper and the administrator of the plan.

Paul Sippil (27:56)
So I always want to draw a distinction. But what Ted Benna said is exactly what I've said, which makes me feel a little better about all of the criticisms I've made, because if Ted Benna is making the same criticisms, and John Oliver did a whole video too on this. He's not quite as credible as Ted Benna, but you know still it was still interesting. But my point is that I feel I'm in pretty good company. What Ted Benna has said is that advisors need to get back to a fee for service model like accountants and attorneys.

Paul Sippil (28:24)
They're not doing an original piece of work, which is just bizarre and inefficient. They need to simply focus on helping people retire. And that fee for service model is exactly what I said regarding a fixed dollar fee, just like accounting firms and law firms oftentimes, unless you know they're working on contingency, for the most part, professional service providers send a bill and detail out a breakdown of their services. Now add something about accounting firms and law firms too.

Paul Sippil (28:52)
Accounting firms don't even know about the tax deduction they can get at the employer level because there are countless accounting firms I have come across where the majority of the money is the partner's money, so they are paying most of the fees anyway, out of participants' accounts in a tax-deferred or tax-advantaged account with non-tax deductible dollars, when they could have opted for a fee-for-service model just like their own services and paid at the employer level. And that really tells me something. If accounting firms don't even know they can do this, along with employee benefits law firms.

Paul Sippil (29:22)
That specialize in retirement plan let re legislation. I know this because I've seen their tax forms too. That shows you just how broken the industry truly is.

Tyson Mutrux (29:22)
I want to hear some more about your other controversial opinions. You got any anything else that's controversial? Because here's what's interesting is I don't I I can't imagine this. Is this a is that opinion a controversial opinion?

Paul Sippil (29:22)
Well, what is, I mean, capitalism, for example, is controversial and my mini book and it's free, so I'm not selling anything here. It's right on my website.

Tyson Mutrux (29:22)
Well how do people get it?

Tyson Mutrux (29:52)
Yeah, just go to Paulsippel, S-I-P-P-I-L dot com, because I think there's a Paulsippel with EL.com too, different Paul Sippel. and it's just a litany of information on my website, one of which is my blog and I've written all about the industry and the page is I believe it's called the missing market, I think. And and that's basically what is happening in the industry.

Paul Sippil (30:16)
It's not that we don't have enough regulations. In fact, it's just the opposite. And this is what might be controversial to people. It might sound like I'm a hardcore regulation guy where I want stricter rules. I don't even like mandates of invoices, but if we're gonna mandate something, it would be much better to mandate consistent invoices with dollars so people can experience the fees in real time as opposed to a fee disclosure document that not everyone knows exists and that isn't even disclosed in a way that people can understand.

Paul Sippil (30:45)
So the whole point about the fact that this is not a fully functioning market is that we need more transparency, and transparency is brought by competition and capitalism. And yet this whole industry evolved through tax engineering through a loophole that Ted Benna, the inventor of the 401k, discovered in the tax code, which makes this industry inherently irrational. but I think we need more awareness and competition, just like when you buy a cell phone or a car. I know nothing about cars.

Paul Sippil (31:13)
But I know how to look at the car fax report. I know how to look at the accident history and the mileage. And when I buy a used car, I know exactly if I everything's lined up it's all lined up. It's there's no negotiation anymore because the market has become so much more efficient. But you can't shop for a four one K plan that way 'cause it's way too confusing and convoluted. But it could be made much more simple if everybody just got an invoice.

Tyson Mutrux (31:13)
Yeah. I do wonder if it's something like like there's things like this with like AI that it's just it's bound to be disruptive.

Tyson Mutrux (31:43)
Dr disrupted in some way, you'd think, where like it's it's been done this way for decades, and you'd think with AI now, like people are gonna find ways of disrupting nobody can because they don't have enough data.

Paul Sippil (31:43)
But with my research and maybe someone listening that's smarter that with AI than me, and I've done some AI work analyzing all the conversations I had over the last 17 years, and it actually came with some inter came back with some interesting findings.

Tyson Mutrux (31:43)
Yeah no matter what I said to plan sponsors, no matter how I changed my approach, because I make a lot of cold calls.

Paul Sippil (32:13)
The reactions were always the same. Complete apathy, disengagement, and lack of interest. Because the structural incentives to care about the fees have never been there. You're a CFO of a company, whether or not the fees are excessive is not going to affect your job. It's not going to give you a pay increase. It's not going to affect the employer's bottom line. And it's not even going to get you in trouble because you have no invoice.

Paul Sippil (32:38)
to look at.

Tyson Mutrux (32:38)
So you can't say the CFO didn't look at the invoices because they were never sent an invoice in the first place.

Paul Sippil (32:38)
And because there's no pain being felt, and because the fees are not clearly shown to the participants and there's no context, which is just as important, even if you do see a two, three hundred dollar fee, which sometimes that does show up on a participant statement, if they even know to look, how do you know enough to know whether or not that should have been twenty dollars? So how can someone get upset when they don't have enough information or knowledge to know

Paul Sippil (33:08)
If that fee is even reasonable in the first place. So I would argue that the incentives to care are not there. And AI has shown that, along with the fact that I've categorized all the plans by industry. And I know for a fact that it's professional services firms that are most likely to pay excessive fees or let's say not have a fidelity bond, especially law firms and medical practices. That's interesting. especially lawyers, the ones that you feel like they should probably know the the most about this area, but they don't. That's that's interesting.

Tyson Mutrux (33:38)
so can people hire you to do this and to do the the negotiating or or is that something where you just are giving them the advice? no, that's a very good question.

Paul Sippil (33:38)
A lot of financial advisors will tout their services as including fee negotiation. I beg people to please do not pay me to do this. Please don't. Because it would be like it would be like robbery for me to accept a fee for there there is no skill to negotiating.

Tyson Mutrux (33:38)
What does negotiating entail?

Paul Sippil (34:06)
Calling and asking for a reduction.

Tyson Mutrux (34:06)
What else?

Paul Sippil (34:06)
No, that's it. And here's something even crazier. I d I didn't even mention this part. a as a quick story, I was talking just a few months ago to a plan sponsor who shelled out over forty nine thousand dollars in commission payments over a five year period from twenty nineteen to twenty twenty four. His record keeper was John Hancock, there was a separate administrator. So the plan sponsor is like the company, is that right?

Tyson Mutrux (34:06)
Yeah.

Paul Sippil (34:06)
When I say plan sponsor, I mean like the owner.

Paul Sippil (34:34)
the one who oversees the plan. Smith and Smith.

Tyson Mutrux (34:34)
Yeah. Yeah. Smith and Smith, let's call it. Okay.

Paul Sippil (34:34)
And this was a professional services company, only three employees. So and most of the money was the owner's money. He didn't even know he had an advisor.

Tyson Mutrux (34:34)
Okay. Like like ours. Like a lot of them. You don't even know if you have an advisor.

Paul Sippil (34:34)
But and the fact that there were forty nine thousand dollars in commissions over a five year period, most of which was paid by him with non-tax deductible dollars.

Paul Sippil (34:58)
was enough for him to want to know who the advisor was. So he called he had his HR director call the administrator of the plan. Remember I went over, you know, who the administrator is, and that's sometimes the same or sometimes the s a separate party from the record keeper. In this case it was separate. He called he had her call the administrator just to find out who the advisor was and they gave the advisor's name. And then she, the HR director, Googled the advisor's name because it was natural to want to know who this person was and learn that this advisor had actually been dead

Paul Sippil (35:27)
Since 2014.

Tyson Mutrux (35:27)
What?

Paul Sippil (35:27)
Now that isn't crazy. I don't know what is. Dead.

Tyson Mutrux (35:27)
What?

Paul Sippil (35:27)
Since 2014.

Tyson Mutrux (35:27)
So what happened is that the firm had probably been collecting the fees, but didn't bother to let the client know or give them a new rep because if the advisor had known or the a company had known that there was no advisor and they were alerted to that, they might have started demanding either a demanding services or

Tyson Mutrux (35:57)
From another advisor from the same firm, or they it might have occurred to them, which they did b due to my advice, that they could simply eliminate the advisor. So the firm had actually no incentive to perform any services.

Paul Sippil (35:57)
But if everybody at least if companies started voluntarily sending invoices, it would have a ripple effect where the Department of Labor could change its guidance, which are suggestions, but people take that guidance seriously.

Paul Sippil (36:25)
And if the market could solve this problem, which it could if it would if if people would just listen to these podcasts, sure. then the concern over having a really bad reputation in the marketplace and being the only one not to send invoices would force companies to actually start sending bills and then these situations would never occur. But this is not the only time where debt because people die.

Paul Sippil (36:50)
And people don't know they have advisors, so there's thousands of other examples, most likely, where debt advisors are collecting money.

Tyson Mutrux (36:50)
I don't know why you can't get a refund. That's crazy. Like especially because they signed a contract. Even if you have a debt advisor, well, well, what what one company did, and this was with they also had John Hancock, I pointed this out.

Paul Sippil (36:50)
This was an accounting firm that had been shelling out all this money in commissions over time. And they knew the advisor didn't do anything. They knew who he was. And it was like

Paul Sippil (37:18)
Well, over a hundred grand over a five year period. What they had the advisor do, they didn't get their money back, but they eliminated the commissions, but they just forced the advisor to work for free to work it off. that's that's smart.

Tyson Mutrux (37:18)
Now, you mentioned though about getting your money back. You're getting into potential topics like lawsuits.

Paul Sippil (37:18)
So the interesting thing about your question is that the lawsuits have taken place with the large companies where the fees aren't really that excessive, maybe an extra thirty dollars per year per person.

Paul Sippil (37:46)
But because there's hundreds of thousands of participants there and and way more assets, there's w far more money in it for the attorneys to make it worth their while, even though it really doesn't help the participants very much.

Tyson Mutrux (37:46)
Okay, ten years, thirty dollars with interest, a little over over three hundred dollars that you saved. All right, I mean I'll take it.

Paul Sippil (37:46)
But that's nothing compared to the amount of excessive fees charged by to participants in small plans where it might be up to five thousand dollars.

Paul Sippil (38:16)
Every year in excessive fees. 5,000 just in one year. They get charged excessively more per month than these c participants at big companies get charged excessively over, let's say, 10 years. That's so crazy. It is. And here's the crazy thing. I mean, there's a lot of crazy things we've been talking about. These plans are too small for any attorney to care enough, even though the benefit to the participants of getting their money back is.

Paul Sippil (38:43)
astronomically greater. So the only way to change the industry is to get the Department of Labor to take some of my suggestions and just have a grassroots campaign to raise awareness because literally the whole industry could change overnight if people would just take these suggestions. Everyone has the power to eliminate their advisor, negotiate lower advisory fees, and eliminate

Paul Sippil (39:07)
or excuse me, negotiate lower record keeping and administration fees or change providers to the ABA retirement funds program, or if you're not a law firm, use a low-cost provider that's pretty good, like a census or employee fiduciary, whose entire fee structure is a fixed fee per participant, with the small exception of a small percentage that employee fiduciary assesses for the custodial portion of.08% of the assets. And I'll add one other thing. It used to be point six percent.

Paul Sippil (39:35)
But because of these asinine fee disclosure regulations that took place in two thousand twelve, where you had to produce this convoluted, complicated document that a lot of people don't understand, employee fiduciary had to raise their fees to disclose what was already very clear on their website point six percent plus fifteen hundred dollars for the first thirty people, plus thirty dollars per participant for each additional participant, right on their website with big letters, pricing.

Paul Sippil (40:02)
Well, apparently the Department of Labor didn't think that was clear enough. So now employee fiduciary who waived the point six percent fee for plans below a million dollars, and by the way, they had a lot of plans below a million dollars.

Tyson Mutrux (40:02)
I bet I bet there's l yeah, a ton of them.

Paul Sippil (40:02)
In order to comply with the regulation, they had to charge more, and their way of charging more was no longer waiving that point zero six percent fee and raising that point six percent fee to point eight percent just to tell people what was already obvious.

Paul Sippil (40:31)
That I'm guessing they're probably making more money now because even if they're not charging under the the million or less, because they're gonna they're just getting it from the bigger companies.

Tyson Mutrux (40:31)
Yeah.

Paul Sippil (40:31)
Well, they only handle for small companies. because that's like their their niche is like the smaller plans. So the Department of Labor actively did harm to these small plans that already wanted to do business with employee fiduciary, who already had the most transparent practices in the industry.

Paul Sippil (41:00)
And then forced employee fiduciary to charge more to produce a document that was much less clear than the what they already produced on their website.

Tyson Mutrux (41:00)
Okay. Well let's shift gears. I wanna I want to hear I can't tease this before, but I want to know about another one of your controversial ideas or thoughts or opinions.

Tyson Mutrux (41:18)
Before we wrap up, because I wanted to is do you have something else you don't really talk about that much that is like more of a controversial topic or opinion? just general? Just generally, yeah. Outside of like When it comes to like like well, if you were gonna advise like a law firm about something when it comes to money, like see like from like a CPA standpoint, or from a forensic accounting standpoint, is there anything else you're like because like the 401k is very niche, like that's a very but like you you can save people a lot of money. Is there another area?

Tyson Mutrux (41:45)
That you can identify that you can save more money? Like I I'm just curious if there's something else we can Well, like on the for example, for sm like on the health insurance side, a lot of people don't know.

Paul Sippil (41:45)
Like I personally don't have health insurance. I have what's called a medical cost sharing program.

Tyson Mutrux (41:45)
Okay, is that one of those actually you explained what it is? I think I know what this is, but yeah, you explained what the Well, they used to be religious has to be religious based and it had to be a company that had been in business before n since before nineteen ninety nine because there was a mandate.

Paul Sippil (42:15)
But when that health insurance like like mandate got lifted, now all these different medical cost sharing programs pop up. And if you're a small business and you have people who are relatively young and healthy and you don't want to be pooled with a bunch of people, many of whom are are sick and require more medical care, that's actually a much more viable option.

Paul Sippil (42:34)
And they're not technically health insurance and it's scary to some people because it's not blue cross. But speaking of negotiation, like these companies will negotiate your medical bill, and it's all about direct pay. And this kind of ties into everything I've been talking about with 401k plans.

Tyson Mutrux (42:34)
Yeah.

Paul Sippil (42:34)
And a lot of the health insurance legislation about these pharmacy benefit managers and the demand for more transparency because of the opacity in the industry mirrors a lot of what I'm saying in the 401k plan industry.

Paul Sippil (43:00)
So I would say consider not even having health insurance. And for bigger law firms, what they also don't know, and I guess it it's not so much a controversial opinion with people stuff people don't know about, is that you can negotiate the broker's commissions and pay the broker a fixed fee. Hmm. Instead of oftentimes when the, you know, account gets larger, it's not always the best deal when the commissions become out of control.

Tyson Mutrux (43:00)
Yeah, we pay an astronomical amount of money in health insurance and

Tyson Mutrux (43:30)
For a while I've considered, okay, with as much as we spend, would it make more sense for us to put us put this money into some sort of financial product and then and we just pay for people's medical? Like if people just came to and I I d I've not looked into this enough, but I do wonder if like does that make more sense because with how much money we spend?

Paul Sippil (43:30)
Possibly, yes. And p some companies do this and there's a whole book on this and it's kind of controversial. so now I thought of something else.

Tyson Mutrux (43:30)
Nice. And this was written several years ago.

Paul Sippil (43:57)
And it's a company called Zane Benefits that administers it. I forgot the name of the book, but it'll come it'll come to me. And it's controversial about whether or not the individual policies are actually tax deductible if the company instead of has a group policy actually pays separately for indiv everyone's individual policy.

Tyson Mutrux (43:57)
Okay.

Paul Sippil (43:57)
Or potentially the company could do a cost-benefit analysis and just give everyone an extra five thousand in salary and just have them buy

Paul Sippil (44:25)
the individual policy on the open marketplace. But through this company, I don't know if they still do it because it's kind of murky as to w like in terms of the legality of whether or not the employer can get a tax deduction for buying the individual policies and this company will help make that happen, basically.

Tyson Mutrux (44:25)
Why would they do it that way as opposed to doing a group plan?

Paul Sippil (44:25)
Because it can come out as less expensive when you take

Paul Sippil (44:49)
Depending on the kind of group and the ages and the health history, I believe, and this is not my complete area of expertise, sure. Taking the individual tax deduction into account, which is really what puts it over the top, that that becomes a more economical arrangement for certain businesses than the traditional group health insurance plan.

Tyson Mutrux (44:49)
Interesting.

Tyson Mutrux (45:18)
We pay fifty percent is what we pay. We don't pay a hundred percent of health insurance. And w we've had some employees be like, Well, it's cheaper if I go get it through the marketplace, which I was like always surprised by. So it happens sometimes, every once in a while, where sometimes an employee will get it for cheaper. So they'll just do their own thing. And and I think the majority of the people though still go through the firm plan. But every once in a while we do have someone but it I guess I wouldn't be surprised though if you did price it. Yeah. Which it that's kind of insane though, that it

Tyson Mutrux (45:48)
'Cause with how much we spend, you'd think that we would get a better deal.

Paul Sippil (45:48)
You think it'd be better as a group, but I think it's because if if you're willing to push it and take the tax deduction, which is murky as to there's different opinions as to whether or not that's tax deductible, and I think that's what makes it worthwhile. Is some people say it's like a loophole in the tax code. But the real radical suggestion is scrap the health insurance altogether and opt for a group. You don't have to do it individually, I do it individually, a group medical cost sharing program, or at least explore

Paul Sippil (46:18)
that possibility and it works especially well for those with a younger employee population.

Tyson Mutrux (46:18)
Is is that better because it's cheaper or is it are there other benefits to that?

Paul Sippil (46:18)
Well, it's better y yeah, it will be it will be cheaper if it's a young population where I mean, you know, if you're being pooled in a group where the average person is older and unhealthier than you are and you got a group of thirty year olds, then you know, mathematically it should be cheaper.

Paul Sippil (46:46)
But the other thing is there's no networks. So and nobody would have to get rid of their doctor. This isn't this isn't even insurance. It's not an HMO.

Tyson Mutrux (46:46)
Yeah. You just get reimbursed. So they pay out of pocket and then they get reimbursed. That's Yeah. Yeah. How is that different from like an MSA? We've never had an MSA. We just had health insurance. But like how's that different? How's the the cost sharing different from an MSA? I'm not that f I'm not particularly familiar with MSAs. Okay. but

Paul Sippil (47:14)
If MSA is technically like part of an insurance program, I mean this isn't technically insurance.

Tyson Mutrux (47:14)
Gotcha.

Paul Sippil (47:14)
Cost sharing, even though they operate similarly, it's not actually insurance. And then you have what they do is they negotiate your medical bills.

Tyson Mutrux (47:14)
Got it. Help you yeah. All right, before we wrap things up, how do people get into if they want to reach out to you, ask your qu ask you questions, how would they do that? Sure. Just go to my website, P-A-U-L-S-I-P-P-I-L dot com, paulsiple.com

Paul Sippil (47:42)
My email, my numbers on there. I have a YouTube channel. You just literally type my name into YouTube. There's and there's some videos on my site. I have a bunch of YouTube clips with me ranting about all the problems in the retirement industry.

Tyson Mutrux (47:42)
Nice. Okay. any other any controversial thing you want to end on when it comes to the retirement industry? I guess I'll just say do not assume that this industry is under regulated.

Paul Sippil (47:42)
In fact, this industry is already

Paul Sippil (48:09)
Heavily regulated. So if nothing else, start questioning your assumptions about what centrally imposed regulations actually do and the consequences that result.

Tyson Mutrux (48:09)
Good advice. Thank you, Paul. Thanks for doing this. Appreciate it.