Most financial advisors likely do not spend their time calling prospective clients and telling them to consider not paying a financial advisor or possibly even getting rid of their 401(k) plan, but that's exactly what Paul Sippil has been doing for the past four years -- and he has quickly built a successful retirement plan practice with this unusual honesty. "Most retirement plan advisors are actually commission-based brokers who can only make money by receiving percentage-based kickbacks from mutual funds and for that reason can't even legally provide advice in spite of referring to themselves as "advisors," while those advisors who can provide advice still charge a percentage-based "management fee" even though most of them don't actually do any managing," Sippil explained in his article entitled The Retirement Plan Racket.
This statement alone should make people hesitate before joining a 401(k) plan or offering a plan through an advisor, but he further says that the entire retirement plan industry is a racket which actually creates the very problems that it purports to solve and engenders continual usage of the unnecessary services it offers through a partnership between the public and private sector promoting continuous regulations which strengthen this partnership at everyone else's expense. His mission is to not only to expose the true nature of how the industry operates, but also to share the message of capitalism and the truth about central economic planning which he believes is the root cause of so many people's retirement planning challenges. In his article referenced above, he lays out a detailed description of how service providers lure plan sponsors and participants into purchasing unnecessary services and collude with regulatory agencies and industry associations to perpetuate their own revenue stream as well as how a free, decentralized society would better provide retirement plan solutions.
Consequently, unlike most advisors whose goal is simply to acquire assets under management, Sippil's aim is to change the way the industry does business, not only by sharing his ideas with each of his clients, but also by speaking to business owners and retirement plan participants throughout the country. He believes that a truly transparent industry would produce far more efficient service providers who would be subject to greater scrutiny from a more informed client base. He also believes that as a result of this increased transparency, clients would demand the fee-based model that he offers where service providers charge flat dollar fees that are commensurate with the level of work and risk involved.
Unfortunately, the Department of Labor and Wall Street's version of transparency, which also expressed in a recent Wall Street Journal article, is to create a mountain of additional paperwork that nobody understands but the bureaucrats responsible for creating it. Naturally, this version produces a more obedient and uninformed client base that will simply continue to nod at whatever service providers tell them. Of course there may be a few curious plan participants who have chosen to take the initiative to learn more about how their plan works by going on the Department of Labor's website. While it's not clear how many people have successfully done so, it's likely about the same number of people who have successfully purchased health insurance on healthcare.gov. Perhaps they could all get together and explain how to navigate through government websites to the rest of us.