401(k) Tort Terror, 401(k) Boogie Man, Sector Pariah….these are just a few of the names used to label Jerry Schlichter. “Mr. Schlichter and his firm Schlichter Bogard & Denton have been the driving force behind many of the headline grabbing 401(k) lawsuits over the past decade. Jerry has successfully garnered multi-million dollar settlements, argued a 401(k) case in front of the U.S. Supreme Court and has recently filed several more lawsuits against some very prominent universities.” writes Rick Unser of the 401(k) Fridays Podcast.
Should we all be scared of this guy? Does he really know his shit? What is his headspace and what are his plans for the future? Boy was I was eager to hear his point of views on the first 2018 episode of Rick Unser’s 401(k) Fridays Podcast and YOWZA…this two part podcast series DELIVERED!
I figured I would immediately hate the guy and I couldn’t wait to mentally shoot down his statements and beliefs. But you know what? Dammit if I didn’t like the guy, he seems genuine, he seems honest and I am convinced he is doing and/or acting in ways that he believes are just and in the best interest of the hard working people in these plans.
However, even though I was smitten with Mr. Schlichter in the beginning, I think his perspective is a little myopic. He comes at everything from one angle and I personally think he lacks true industry experience and real 401(k) world knowledge. A lack of a proper business perspective if you will. But when I think about it, his low-fees, lawsuit myopia probably serves him well in his current vocation and fuels his success.
He says that 401(k) fees were hidden away in a dark closet and that people didn’t understand the fees and the revenue sharing arrangements. I also felt this way when I first started in the 401(k) industry. I was shocked at how difficult it was to uncover all the fees attached to a plan. So, on several points I agree with Jerry…uh…I mean Mr. Schlichter, Sir. As my career and my knowledge base evolved I learned that Recordkeeping was in reality a pretty tough business to turn a profit. I learned the concept of value and that sometimes paying more for something can be the best decision. In a general sense I guess you could say I grew up and earned through experience a more balanced perspective on all things 401(k).
Do yourself a favor and carve out some time to listen to episodes 100 and 101 of the 401k Fridays Podcast, I don’t think there has ever been a more exciting and interesting podcast for our industry (yup, that includes the ones that have interviewed yours truly and my little beer drinking show The Retireholiks).
Now, I don’t agree with everything Mr. Schlichter says and I get the vibe from Rick Unser’s inflection and hard pressing questions that maybe he doesn’t either. My biggest point of contention centers on his comments on passive index funds. As he quotes the old studies of how active money managers cannot beat the market (I recent learned that he is a fan of Bogle and Bogle a fan of him…see related article from 401k Specialist Magazine. In my opinion he hints that he believes that choosing actively managed funds for a 401(k) core menu would be some kind of infraction or at the very least not acting in the best interest of the plan and it’s participants….c’mon??!! It should be noted that I sit on fence when it comes to the old active versus passive debate, but am I crazy to think Jerry is taking this one a little too far?
Mr. Schlichter also talks about “walling off” payroll processing from 401(k) and the potential breaches that exist here. Yes! Take that Paychex and ADP Haha! See how quickly I jump to Mr. Schlichter’s ship when it benefits me or he takes aim at my competitors 🙂
In summary, check out 401(k) Fridays Episode 100 and 101 with guest Jerry Schlichter….it is a must. And I am proposing we as an industry pull back a bit with the name calling on Mr. Schlichter…there is no need for words like Terror, Boogie Man or Pariah….seems like a pretty good dude to me.
It should be noted that I call him Mr. Schlichter so he doesn’t come after me with his litigious sword of Fiduciary Death.