Wednesday, April 20, 2005

Benefit compliance and vendors part 2

Single sourcing, or using multiple vendors? Let’s take 401(k), where you might have Fidelity doing the recordkeeping and account administration (stock investments). This seems like the fox guarding the henhouse and goes back to the whole Spitzer conversation again. I think this may be the next place he goes hunting for indiscretions. Let’s take another example for benefit administration. Isn’t it better if you have your broker, benefit administrator and benefit consultant as separate entities? In my opinion, you simply need to be wary of commissions these days and if possible, move your brokers toward fee based services.

Now I’m a big proponent of single vendor management. But looking at the mess in the US insurance industry and projecting out what might be next, I think there are compliance risks that we may encounter in the future, and if your organization is not sufficiently forward looking, you have exposure.