2009 Retirement Plan Adviser Team of the Year

Team members: Mark Wetzel, Michael Goss, Karen Paulson, Kate Fournier, Ryan Gardner, Chris Kachmar, Tony Tranghese, Bill Peck

By nearly any measure, Fiduciary Investment Advisors (FIA) is a team that is more than the sum of its parts. Its team members all come together to deliver an in-house process that emphasizes ERISA procedural prudence and fiduciary process first. “We have spent a lot of time and money building a highly credentialed in-house investment due diligence team that we feel is unparalleled in the adviser team marketplace,” says Michael Goss, who describes the team’s focus as providing “customized consulting services to assist our clients in achieving their investment objectives, while fulfilling their fiduciary obligations.”

Not only is the team resolved in its commitment to its clients, it also delivers that commitment on a breadth of scale beyond the reach of many other firms, with an extensive experience with defined benefit (DB) plans and endowments in addition to the investment services offered to 401(k) and 403(b) plans, as well as government, and nonqualified deferred compensation programs. That breadth of expertise means the firm frequently is entrusted with more than one retirement plan at a company.

FIA provides those services to plans with as little as $5 million in assets, and to those as large as $1.2 billion, totaling approximately $10 billion in assets under advisement. The firm’s target market is correspondingly broad: plans in the $25 million to $250 million range. “Our depth and expertise allows us to compete and win large cases against the national consulting firms, yet we still provide the traditional adviser services to the mid-size plan marketplace,” Goss says. “We feel we deliver a unique blend of large-firm investment expertise with the personalized service of a small adviser.”

A testament to their success in balancing those interests is found in a 100% client retention rate, and the doubling of revenues in the last six years. “Client retention and satisfaction is foremost,” Goss notes. A fact that attests to the credibility of their efforts, Wetzel says, is that multiple law firms have hired FIA to advise and serve as a fiduciary to retirement plans. “It speaks to our process and procedure when ERISA attorneys are putting their stamp of approval on us and referring clients to us,” he says. The firm offers a client-centered service model, Wetzel says, that matches each client with two consultants, an analyst, and a client service contact.

Life after UBS

In general, when you hear about advisers changing firms or, more appropriately, changing models, they tend to move from a wirehouse environment, to an independent broker/dealer, to perhaps an RIA model. Not Fiduciary Investment Advisors. A few years ago, its members had their own “big bang” and jumped from a traditional wirehouse to registered investment adviser (RIA).

The team that is now Fiduciary Investment Advisors had its origins in 1991, when Michael Goss became the second adviser on the Mark Wetzel team at Kidder, Peabody & Co. Kidder, Peabody was bought by Paine Webber and Company in 1994, which later merged with UBS AG in 2000. Although Wetzel and his growing team remained throughout the mergers and acquisitions, it was clear that retirement plans were not the core business and, when that is the case, “you get lost,” Goss says. At the time, the group was part of the PRIME Asset Consulting Group at UBS, offering a fee-for-service consulting model and pressing for fiduciary status. However, even with a fee-for-service model, some clients were skeptical of the group’s affiliation with a brokerage firm. “We would go out and clients and prospects were very excited—but there was always someone questioning us,” Goss says.

So, in 2006, all but one of the team of 15 left to found Fiduciary Investment Advisors. The firm has grown to 23 members, including seven advisers (six of the consultants are principals of the firm as well; the seventh principal is Chief Operating Officer Maureen Cooper). Aside from that breadth at the top, something that separates FIA from its competitors, Goss says, is the broad retirement plan expertise of the members of the firm—among the consultants, there are six MBAs, three CFAs, three PRPs, two AIFs; the analysts have one CPA and two CFAs among them; and the average tenure in the industry across consultants is 17 years.

One of the driving forces behind leaving UBS was the need to be able to serve as fiduciaries and offer a hard-dollar fee compensation model. All compensation is hard-dollar RIA consulting fees. FIA generally gives clients the option of a flat fee or asset-based fee, and discloses the fees quarterly in a bill.

In order to lower fees, Goss says, the company does full fee disclosure analysis on 401(k) client recordkeepers and fund companies, and benchmarks those versus RFP pricing that the company has done to get a good idea of how competitive the results are. “This has resulted in tremendous savings for some of our newer clients and some savings for some of our longer-term clients. One client saved more than $300k annually in fees,” he says.

The entire FIA team meets every week, and the company also has a partner meeting every two weeks. It is a very organized structure, Wetzel admits. One way the FIA ensures its service delivery meets its standards is by very clearly defining roles within the team, and that also provides opportunities for growth for employees who want to move up the ladder or branch out into a new area. In fact, FIA is proud of its ability to offer career paths for people within the firm. For example, partner Ryan Gardner started as a college intern, then became an analyst, and is now a principal at the firm .

The company goal for 2009 is to add 20 to 25 new clients, Wetzel says. While the firm has the capacity for most of that growth at present, if the staff reaches that goal, they would likely need to hire a new consultant, Goss notes.

Another unique aspect of the team is that the firm has made an effort to have its consultants sit on investment committees to better understand the purchasing decision in the context of that fiduciary responsibility, as well as make decisions on plan design, investment options, and the investment policy—and understand how those decisions must relate to broader initiatives. For example, Wetzel is a member of five investment committees, including Novartis Corporation, and Goss, who chairs the investment committee at the Watkinson School, also sits on the investment committee of The Horace Bushnell Memorial Hall Corporation. By actually spending time in the clients’ shoes, Wetzel says, it helps FIA’s advisers better serve their clients.

With its defined contribution plan clients, in order to boost participation and deferrals, FIA has encouraged the use of automatic enrollment (in use at more than 40% of clients) and deferral escalation. Working with participants is a focus for FIA, which offers group and one-on-one meetings, although the delivery of participant services varies from client to client, based on plan size or what the client needs.

During 2008, some of the initiatives FIA used with its DB clients (30% of FIAs assets are in DB plans) included implementing more long-duration bond products so the portfolios are more sensitive to the plans’ liabilities and, in some plans, the company increased the use of low-volatility hedge funds of funds to smooth volatility further. Not all the pension plan shifts have gone that smoothly, however. Goss says that, at one client, the CFO left unexpectedly and had not communicated the funding status of the pension properly to ownership, which was surprised by the amount of the necessary contribution for the year. Although it could have been a negative situation, FIA was able to educate them quickly about actuarial funding and the various risk-reward tradeoffs of different mixes. Goss notes, “This has resulted in a more educated client and a terrific reference.”