As the one credited for making the term “blind squirrel” famous for advisers that only have a few 401(k) or defined contribution plans, you would think that I would be advocating for their demise and elimination. No doubt that to be a successful DC adviser you cannot dabble and you need to focus on trying to get at least 10 plans and $30 million in plan assets as quickly as possible. Many of the problems facing the DC market are caused and epitomized by blind squirrels. Yet, blind squirrels are vital to the continued growth and success of the DC market, as well as the hope that we can help people retire more successfully.
Of the more than 600,000 plans with between $250,000 and $1 million, 75% of plans that have an adviser are serviced by a blind squirrel or one that has fewer than five plans – that percentage is even higher for smaller plans. When a plan sponsor becomes more sophisticated and switches advisers, the new adviser tends to be more experienced. These blind squirrels usually do not have the time or expertise to properly service employers. Plan participants are often used by regulators and direct sold providers as reasons why advisers are evil and should be regulated out. Providers’ costs to close, service and retain plans sold by blind squirrels are higher. Broker-dealers are loath to let less experienced advisers be fiduciaries, as they expose the distributors to significant liability and compliance headaches, creating specialty groups to whom they try to push larger – if not all – DC plans. So why can blind squirrels be important to the DC industry?
