Cookie Cutter Doesn't Cut It

I was on the phone with a sophisticated client a few days ago. She remarked that the solution she was looking at was just pulled off the shelf and could equally apply to any [company]. She said that was bad consulting. I have to agree. Thankfully, that consulting was not ours.

When I started in the business, back in prehistoric times, the modus operandi that many of us were introduced to included answer the phone, do the work, record your time, and someone will bill the client for it. Complaints appeared to be limited.

Things got more complex. The booming economy in our business created by the Reagan-era bull markets and the Tax Reform Act of 1986 was a veritable full employment act for consulting actuaries. Employers of those actuaries needed all the quality staff they could find and clients needed all the support they could get.

Things changed. As processes got automated and later, as companies began to exit the business of sponsoring pension plans, this once highly valued actuarial service became more of a commodity. Whether it was true or not, consulting actuaries who could deliver actuarial valuations were viewed as being a dime a dozen.

How did the best differentiate themselves? They began to provide more and more customized solutions. They began to understand the client's business needs. There was a sudden shift in the order of necessary skills. The key ability of being able to do things was replaced in the pecking order by the ability to listen and then to thoughtfully react.

Somewhere around the same time, our society seemed to become far more litigious. The answer to many problems became finding some other party who could be found to be at fault and exacting a price from that party. Some made the observation that in response to this, there were a number of consulting firms that developed solutions that everyone should bring to each of their clients. In fact, I can recall professional friends of mine complaining that they needed to be able to "check the box' for each of their clients even if they felt as if that meant they were providing less than the optimal answer. In other words, they were being encouraged, or even required to pull the answer off the shelf or some might say, to deliver a cookie cutter solution.

Put yourself in the corporate shoes. Your adviser that you have worked with for years brings you a solution that they label best-in-class. A few days later, you find yourself at a gathering with your peers from other local companies. Alas, they have all been brought the same solution.

How is that possible? The companies aren't the same. Their plans aren't the same.

It's then that you remember that you had agreed, based on a referral, to a meeting the next day with some consultant you had never heard of. You wondered if she would try to sell you on the same best-in-class solution.

She didn't. After the initial niceties, she asked you a bunch of questions. And after each question, she listened to your answer and reacted accordingly by asking a follow-up, more probing question. She remarked that she was surprised that you weren't pursuing [pick your favorite strategy to fill in the blank] instead of the not best-in-class one that your longtime adviser had brought you.

You wanted to to business with her, didn't you?

Are Your Consultants Getting It Right? Ask Another Consultant to Check for You.

Are your retirement plan consultants doing a good job? How do you know? Are the fees they are charging you fair? How do you know?

The answers to those questions, in reality, for most companies, are probably a consistent "I don't know", or "I hope so." The fact is that much like relationships with audit firms prior to Sarbanes-Oxley, the typical company has no way of knowing. Oh, they know if there is a disaster, but beyond that, they really don't know if they are getting quality service or high value for the fees that they pay.

Do you? I didn't think so. I bet that you would like to know how to find out.

Perhaps, in the long run, you will save money and get better value from your consulting relationship by engaging a consultant to monitor, or at least review your consultants. Sounds counterintuitive, huh? It is, but if you really think about it, it makes sense.

Essentially what you are doing is finding a consultant who will agree to not seek your ongoing work, but whose purpose is to review the quality and the value of the work that you are actually getting from your actual consultants. If done properly, such a review should be able to answer these questions:

• Are your consultants following accepted professional standards of practice?
• Are they holding to their fee agreements with you?
• Are their fees fair?
• Is the work that they do for you accurate and complete?
• Is the work technically sound? Have any consulting letters explored all the issues, or simply given you the same solution, packaged very slightly differently, that they give to all their clients?
• Are appropriate levels of consultants servicing your account? In other words, is the team too top-heavy, too bottom-heavy, or about right?
• Is the relationship still fresh? Often times, teams that have seen no change do not bring you new ideas?
• What are their other clients saying about them that is particularly good or bad? Would you agree with the good things? Have you seen the bad things? If not, are they not present on your account, or are they just doing a good job of hiding them?

Based on feedback from clients, you see much more variability with the larger firms. Are you getting the A team or the C team? Don't you think it's time you found out?