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Exclusive Interview (Part I): Phil Chiricotti to Retirement Industry: Outsource Fiduciary and combine with HSA or Die!

August 19
00:05 2014

Phil Chiricotti’s blunt no-holds-barred style makes him a perfectly delicious interview. His incendiary commentary is so provocative we considered whether it would be too hot for our readers. But, then again, our readers are old enough to play with PhilChiricotti_01_Part1fire, so we decided to give Phil the keys to the typewriter and have him do what his may. And he certainly did what he might. So much so that, for the first time since our blockbuster interview with Martin Smith (“Exclusive Interview: Frontline Producer Explains Controversial 401k Documentary – The Good”,, April 30, 2013), we’ve had to break this exclusive interview up into four parts, each meriting its own inflammatory title. We’re sure you’ll savor all four parts to this amazing interview. Without further ado, here they are:

Part I: Phil Chiricotti to Retirement Industry: Outsource Fiduciary and combine with HSA or Die!
Part II: Phil Chiricotti says Lobbying to Replace 401k is “Lunacy”
Part III: Phil Chiricotti Offers Surprising Comments on the Fiduciary Standard
Part IV: Phil Chiricotti Sees MEPs as THE Fiduciary Solution for Small Plans

Part I begins here:

Phil Chiricotti is the President of the Center for Due Diligence (CFDD), an information and strategic resource firm serving the retirement plans advisory industry. Since founding the CFDD in 1994, Mr. Chiricotti has focused exclusively on retirement plans, including advisor due diligence. After years of ERISA advisory work, the CFDD launched a 401k program competitive analysis service. The endeavor proved successful and the CFDD quickly gained dominant market share. Encouraged by advisor clients, the CFDD subsequently launched its first Advisor Conference in 2003. By providing advisors with the industry’s richest content, the CFDD’s conference quickly became one of the premier events for the retirement plans advisory industry. 

Harnessing an unmatched network of accomplished contributors, Phil has authored decades of highly respected research and thought leadership. Widely quoted and routinely listed as one of the most influential people in the industry, he uses his pen as a sword, brings keen analytical insight to the industry and delivers it in a no nonsense fashion guaranteed to provoke intellectual thought. Prior to entering the retirement plans industry, he worked in strategic planning, acquisitions and other financial areas for some of the nation’s largest firms, including major banks, pharmaceutical companies and the energy industry. He has a BS/BA degree with majors in accounting and finance. As a former member of the armed forces and Vietnam veteran, Mr. Chiricotti has raised meaningful donations for the Injured Marine Semper Fi Fund and the Wounded Warrior Project.

FN: The CFDD’s annual advisor conference is one of the largest and most anticipated events by retirement plan advisors. How do you explain the event’s popularity and what are you planning to do special at your October conference this year?
Chiricotti: There is only one thing that really resonates on the conference circuit and that is cutting edge content. Not filler, but rich, timely, pertinent, independent and unbiased content. Known as the King of Content, the CFDD has always been distinguished by the ability to identify and articulate major new industry trends.

Outsourced 3(16) services, Health Savings Accounts (HSAs) and other fiduciary support services are spearheading new business in a big way.  Wholesalers and the broad advisor community haven’t figured it out yet, but those ahead of the curve are banging out the sales and attracting new prospects at a brisk pace. While these trends have only just begun, other CFDD ’14 tracks  will delve into properly structured MEPs – the easiest way to access 3(16) services – Social Security, QLACs, liquid alts for DC plans, motivating plan sponsors to implement your recommendations, building enterprise value  and much more.

FN: How do leading edge retirement advisors differentiate and how does this help plan sponsors?
Chiricotti: Like marketing, differentiation and value propositions are a work in progress. To be successful, they must meet plan sponsor needs in an evolving marketplace. Ironically, the biggest opportunities are also the biggest threats. They are threats because if you don’t meet client needs, competitors will and your business will become marginalized or worse. Given that healthcare costs could consume us all in the years ahead, cost control, limiting liability and reducing administrative burden has become Job #1 for employers of all sizes.Outcomes are being redefined and retirement specialists who fail to adapt and provide solutions to these glaring needs may not survive.

Helping employees accumulate enough savings to retire has always been important, but it has morphed into something much bigger, i.e., corporate viability and competitiveness. More employees plan to work through retirement than ever before because they can’t afford to retire. The demographics, lack of savings and ballooning cost of healthcare are a toxic cocktail. There were about 40 million workers at retirement age in 2011. That will increase to more than 70 million by 2020. The percentage of age 55-65 workers planning to delay retirement has also increased to almost 50%. When compared to younger workers, the cost of workman’s compensation, disability and healthcare for older workers is staggering. Healthcare cost is also increasing at an alarming rate. Like advisors who fail to solve problems and meet client needs, employers who fail to get older workers off their books at retirement age will not be able to compete and may not survive in an increasingly competitive global economy.

The push to control health care costs has increased interest in High Deductible Health Plans which come with the ability to accumulate tax favored wealth in a Health Savings Account. In addition to huge employer savings on healthcare and employment taxes, advisors can combine HSAs with a few other tactics to facilitate retirement readiness, outcomes (employer & participant), added value, and differentiation to capture plan sponsor attention in an unprecedented manner.  BAML, US Bank, Fidelity and a few select administrators – like Health Savings Administrators – are all aggressively marketing HSAs, but banks with expense paying debit cards and brokerage subsidiaries are particularly well positioned. Advisors focusing on outcomes will also have to provide more participant education on Social Security benefit choices, QLACs and Medicare.

Like their fight against MEPs, lobbyists and non-providers are fighting outsourced 3(16) services because they are going to have an impact on consolidation. TPAs haven’t figured it out yet, but as noted by Pentegra and others, 3(16) services will be widely embraced in the next few years and eventually become a low cost commodity. Full compliance has become impossible and employers of all sizes do not want to be saddled with the cost, burden and liability associated with complicated administration. The majority of plan violations involve administrative functions of the named fiduciaries and 3(16) services can provide a solution to most of these problems.

Rather than attacking charlatans and waiting to be replaced by an advisor who is supporting these services, advisors should align with credible 3(16) providers and help sponsors identify, vet and monitor them.Top advisors and independent recordkeepers in the CFDD’s network are already doing this. Committees will continue as fiduciaries and they will need 3(16) oversight. These services vary widely and advisors can help with determining scale, expertise, capability, services, fiduciary roles, cost analysis, insurance, bonding, insurance backed warranties, contract review, and verification that the services are being performed in an effective manner. The industry is asleep at the wheel, but combining 3(16) services with HSAs is like hunting small game with a RPG. Given the opportunity, CFDD ’14 will include spirited breakout sessions on both topics.

Click here to go to the next installment: Part II: Phil Chiricotti says Lobbying to Replace 401k is “Lunacy” – Phil explains why the mass media and the government is so wrong when it comes to the retirement plan business – and how an unknowing industry may actually be playing into their hands.

Christopher Carosa, author of 401(k) Fiduciary Solutions, will be speaking at CFDD‘s October 15-17, 2014 Advisor Conference on the subject of “Using Proven Psychological Techniques to Motivate Plan Sponsors & Participants to Implement Your Recommendations.” The session will feature an interactive presentation featuring tools mentioned in his new book Hey! What’s My Number? – The One Thing Every Retirement Investor Wants and Needs to Know!



About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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