Dentistry Uncensored with Howard Farran
Dentistry Uncensored with Howard Farran
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197 Corporate Retirement Plans with Tom Zgainer : Dentistry Uncensored with Howard Farran

197 Corporate Retirement Plans with Tom Zgainer : Dentistry Uncensored with Howard Farran

10/19/2015 12:00:00 PM   |   Comments: 0   |   Views: 718

Your 401(k) might not be as cool as you thought it was.

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AUDIO - HSP #197 - Tom Zgainer

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VIDEO - HSP #197 - Tom Zgainer

Howard and Tom discuss plan design types for dentists, your role as a plan fiduciary, and the effect of investment related fees over time.



Tom has spent the last 30 years working with businesses small and large to provide superior retirement plan, employee benefit, and payroll solutions for their employees. Over the past 12 years, he has helped over 3000 companies establish a new or improved retirement plan. Working directly with plan sponsors, Tom and his team help create strategies and solutions for their retirement plans that meet both individual and corporate objectives. Prior to founding America’s Best 401k, Tom worked for two national record keepers in Sr. sales management positions and was also the Vice President of Corporate Retirement plans for Personal Capital, a Silicon Valley based digital wealth management firm. He started his business career with Paychex in 1983.


Howard Farran: It is a huge honor today to be interviewing Tom Zgainer, who actually ... we both live in the same town. He lives north of me by my sister and it's tough ... you know I'm a dentist and I know dentists, they want to learn everything they can on root canals, fillings, crowns, bleaching, bonding, veneers, and we don't really think about what Tom does. Tom specializes on what happens on that horrible day when you're no longer a practicing dentist. Tom, am I really going to retire someday? 

Tom Zgainer: If you start early and you plan and you think ahead, then yes. We should all be thinking about our active life after work, right? We're going to work for X period of time and a lot of the dentists I speak to, they want to retire on this particular day, but are they really retiring or are they transitioning into something else? That's part of what we're going to talk about today is to look ahead but also to be sure that things you might have in place, as you start to look ahead, are actually working on your behalf. It's going to lead you to an outcome you want at retirement. 

Howard Farran: You got involved with Tony Robbins when Tony Robbins realized he had the same problem that I know all the dentists do and that is, he was looking at his own retirement plan and he didn't quite understand his own plan. What percent of the dentists do you think understand the details of their existing 401k, the fees used, all the parts and pieces? When you talk to a dentist--

Tom Zgainer: Yes.

Howard Farran: What percent of them come in and pretty much already know the details before you talk to them? 

Tom Zgainer: They're cognizant of some of the details, but rather just isolate dentistry, let's just put into business owners in general. At America's Best 401k over the past year we have probably reviewed close to 1,500 401k plans, meaning we received documents that are called fee disclosure forms from the plan's sponsor. Many are dentists, in fact one in every five clients we've [inaudible 00:02:09] is a dentist. I would suggest that close to 75 to 80% of the business owners we speak to are not aware or were not aware of the true underlying costs affecting their retirement plan. This is universal. 

In 2012 after nearly 30 years, for the first time 401k providers were required to provide disclosure forms. It came out in two forms, the first is called a 408b2 employer fee disclosure form. It came out in July of 2012. In August version of that came out for participants called a 404A5. These documents came out anywhere from 30 to 50 pages long and certainly while they're printed in English and anybody could read them, to understand them, right and if I put it in parlays in terms of even in dentistry, you have optics here, right, you can see things, but can you really make a diagnosis? The average layperson cannot. When you see so many numbers over so many pieces of paper in different columns and then replicate it in some measure, it looks like double speak. You couldn't get to the point, so by percentage, it's extremely high that people do not know. 

Two other key stats to point out, close to 65% of 401k plan participants believe there are no investment related fees at all. Yet if you invest in a mutual fund or an index fund, it has expense ratio. People think there's no cost. Close to 40% of plan sponsors, the dentists in this case, the owner of the practice, do not know the average expense ratios of the funds in their plan. A little side story, we went to the Cerec 30 conference a couple of weeks ago and over 750 dentists requested proposals from us after speaking for a couple of days. Since the follow up, we've been asking these folks for their fee disclosures. If I could lump into the categories of who knew just where to get it and how fast they can get it, maybe 5%. Many have said, I've actually never even logged on to a website, my broker takes care of that. I saw that report a while back but I never really looked at it, or they call their provider, I can't find it, I can't find it on the website, where is this thing? 

Here's the underlying problem with this, is the practice owner, business owner, you are required to articulate that document. Not only that, you're required to make sure your participants know about this document and understand it. We're so busy, we're doing our own things and yet the IRS has very clear code that says, as the plan fiduciary key point because you can only appoint a fiduciary. If you don't have one, you are the fiduciary of the plan, which almost essentially makes you the defacto investment expert for your 401k.

Yet you got involved in dentistry to practice dentistry, right? Not to be an investment expert. It's universally by largest percentage, people are unknowing. They are unknowing where their 401k plan is heading. It's not just your 401k, it could be their Simple or their SEP or their individual retirement account, right? They don't really know the effect of fees. They'll look at numbers on a paper but not know, what's the outcome of that over time. If I was at 1% or I was at 3% in fees that could be a difference of running out of money 10 to 15 times earlier than you expected to. It's a big problem.

Howard Farran: What would be the difference in the overhead fees for someone starting at 25, retiring at 65 or, you know 40 years?

Tom Zgainer: There is a couple of different ways to look at that and I speak to a lot of young dentists who are looking at their first retirement plan. They're balancing their educational loans, getting the practice up and running, buying equipment, what have you, maybe delaying the retirement, right, but there's a statistic we show that if, for example Mary starts saving at age 24 and only puts money away for 10 years, but it gets to grow for 40 years. 

Then you have Joe out there who waits 10 more years to start saving at age 35 and he puts money in three times longer for 30 years. Even though Mary only contributed for 10 years, given a light interest rate over time, she will have about $120,000 more than Joe, even though he contributed three times longer. 

That power of that extra 10 years of compounding is huge, coupled with the fact of, what are you expenses? On average if you look at it, 1% extra in fees could essentially rob you of about 10 years of retirement savings. All things being considered, when you take into the factors of returns and of actual expenses, so it's critically important. 

We showed this at Cerec when Tony Robbins and I actually were on stage, is we showed three examples. Three examples of dentists who were in the audience who are now clients of ours. We showed them where over a 20 year horizon, broken down in five year increments, the effect of fee differentials over time. In two of the cases I think we reduced their fees about 57%. One was about 70%, but the end line effect was massive. 

It was even more so impactful because in a lot of the dentists practices we work with, the dentist, has the largest balance in the plan, so therefore the most to lose. A really big thing, so a lot of these dentists when they see their numbers, it's a family impact severely. Along with that, they're now realizing, well I provided a 401k plan for my employees, that's a good thing but if you're really heading them down the same bad direction you were heading yourself, is it really any good? 

These are things, whether somebody considers using us or many other fine providers that have a similar philosophy as us, is that you at least have to know your number. You deserve to know exactly where your plan is heading and to be sure you're heading in a proper direction, really, really key. 

Howard Farran: How would some ... most of my fans are driving to work right now and they're listening to you on sound only. How could they get to work and go to their retirement website and figure out what their fees are?

Tom Zgainer: There's a couple of things you can do, the first thing, it's a document clearly some people may not know the name, meaning the providers even, which is puzzling. The technical term of document is a 408b2 and your 408b2 is required to show all the underlying investment expenses in your plan and any other fees being charged on top. It really is the treasure map. 

When America's Best 401k was launched in 2012, it was launched a week after these disclosure documents came out. We knew it was coming. We planned for that, but we knew when we had that treasure map, that would allow us to become a really disruptive force/voice because before that everybody was able to shew, shew, or basically shroud any fees that were being charged. You had no verification of proof. 

They should call their provider or they should go on to the website where they log in as a plan sponsor and see if they can search for a disclosure form or under reports or 408b2 or fee disclosure. The nomenclature might be different, website to website. If you get a little frustrated and can't find it just call your provider and basically demand that within an hour they send it over in a PDF file. We want those folks to send us the document because we will provide them a complimentary side by side fee analysis. 

What a lot of business owners don't know is you are required under the rules of the Department of Labor and Arista to benchmark your plan to alternatives on a regular basis. Your current provider will never proactively say, "Howard, here's our plan and I just went out and compared it to three other ones". They'll never, ever do it. 

We saw one last week where a broker with an insurance company, she said, "Let's take your plan out show it to some other options," well she showed it to three other options that were identical to one that she had the business owner in. In this particular case, the all in investment related expenses were about 1.85%. She showed them a couple of others that were about 1.7 and 1.65%. The business owner now thinks that's the only kind of 401k plan provided exists. 

We came in and we're .65% so think of it, they're at 1.8, we took them down to .65. The effect over time on this plan because it was pretty sizable was close to $2,400,000 over 20 years, meaning they would have that much more in plan assets over that period of time by drastically reducing their investment related fees. 

Howard Farran: Let's go back in the day ... you know I got out of school 28 years ago and the reputation of your broker, I don't want to throw anybody under the bridge I'll get in trouble, but your typical Merrill Lynch broker whatever, your insurance if you had to buy insurance, they had all these fancy plans and basically there was a lot of trading going on and so a lot of the profits you were making, the broker was making a lot of money. Then the trend started to become discount brokers, like Charles Schwab started discount brokering. Then it even got more lower cost with these index funds or spiders, so what you're saying is that a lot of the older dentists get that today but what they might not get is that the actual fee for the plan could be eating up a lot of your accrued benefits?

Tom Zgainer: Here's a perfect example of that, we use in our core fund lineup, which a lot of the dentists on Dental Town, and a lot of the forms back and forth they're, many are really big on an index fund strategy and they like Vanguard funds and Dimensional funds, funds that use in our core plan list--

Howard Farran: Is spider a synonym for index fund? 

Tom Zgainer: It's a variation of it. What a lot of dentists will like is say, we want an index fund strategy, so the younger guys you can see really moving to that, even a lot of the older guys because the discussion points have become more prevalent around this topic. We'll come across that will say, well we have a low cost index fund strategy like Vanguard. We have those in our plans already, why would we want to move? 

I'll say, Doc, let's get your fee disclosure and let's look over one column over because these are plans with insurance companies. Not to demean insurance companies in any way, they're great and they serve a wonderful purpose in many regards, but in relationship to your 401k plan there's zero reason to ever have your assets with an insurance company and here's why; you have a core foundation that are index funds but then one column over on that fee disclosure. There'll be a term called CAC, contract asset charge, or AMC, asset management charge and so what the insurance company will do is put a layer of fees there. Maybe one to one and quarter percent, which completely mitigates the fact and the reason why and the benefit of why you would want to have an index fund in the first place. 

You start out with very low cost, in this column which is good but then over here, they add one, one and a quarter percent to make sure they first line their pockets. Why, because these funds don't pay revenue sharing and they don't pay underlying commissions to any brokers. If they offer them they could never get paid so to offset why not getting paid they add it on. 

It's simple as this, I tell my wife I went and had salad for lunch today. She's like, that's great honey, the foundation of your diet today was good. I failed to mention I went down the salad bar and added on every topping and at the end of the day my salad ends up at 4,500 calories. While the foundation might have been in theory good, the end did me no good if I ruin the foundation. That's what these guys do. 

This is how I got connected with Tony Robbins' plan. When he came to me and he's a partner in America's Best 401k, but he came to me as a business owner. One of his primary companies, based in San Diego, close to 300 employees and over $5 million 401k plan, he had heard of me, what I was doing at America's Best 401k through his son, Josh. He contacted me in June of 2013, his HR director and said we heard about what you're doing and we think we have a problem with our 401k plan. We'd like you to do an analysis. 

It became readily apparent he was with one of these insurance company products. They were close to 180-184 basis points all in, when you took all the fees. Foundationally there was some good funds but then the fees on top like I just mentioned, basically ruined it. The effect in his plan of us getting his costs down under .60% is more than $5 million over 20 years will be returned to his employees. That's a massive amount and you start dividing out by the people who have the largest balances in the plan, that foundationally will have a huge affect on the quality of their life when they choose to stop working. 

When he learned that about his plan, his book, Money Master The Game, of which we were featured very prominently, we had a discussion and he said, okay Tom, you fix this for my plan, how big of a problem is this universally? If I didn't understand this and I'm pretty financially astute here obviously, who doesn't know what's really going on? So we presented a lot of statistics. There's roughly 540,000 401k plans out there and most of them, the largest majority, well over 450-460,000 are going to be with 15 to 18 insurance companies and two national payroll providers. 

That's where most of the plans are and collectively most of them have been sold, broker driven, were the incentive is to be paid commissions or revenue sharing first. The brokers getting paid, the insurance company's getting paid, the broker dealer's getting paid, maybe a third party administrator's getting paid, the provider's getting paid. Everybody's chipping away, but oh by the way, it's your 401k plan. It's your assets, right, but they've put these layers out front to make sure that they get paid. 

Howard Farran: The only secret to lower prices is to have lower cost and so when you're dealing with companies, like young dentists might ... the young ones will ask me, "What about multi-level marketing, is that good business?" and I'll say, "Well in multi-level marketing you've built in six middlemen, whereas Walmart doesn't buy through any middlemen. They buy directly from the manufacturer". 

When a dentist is looking at the person they're working with, they got to get paid and they have a huge broker ... they have a large payroll to pay, then they can't have lower prices. You have to have lower costs, so the question is, they're probably answering, so how do you have lower costs? If you're overhead is so much lower, why is that? You have to have lower costs, how did you build in lower cost structure to have lower fees? 

Tom Zgainer: When the foundation of America's Best 401k was created, it wasn't to go out and do anything magical, it was to do things the right way, recognizing in our space, that this is your 401k plan and now ours. The populous has been sold on the fact that they don't qualify for low cost funds, because their company is too small or the assets in their plan are at a small amount. They put artificially created barriers to say, when you reach a million dollars in assets, we'll lower your fees, right? This is sales BS, quite frankly, there's no fact that that should be the actual basis. It's a matter of what you were sold versus what was put together that's in your best interest only. 

When we created the foundation we said, let's use a core fund lineup, using an index fund strategy and in our case, the average investment ratio, the funds in our plan average .12%, twelve basis points. The average 401k plan in the United States is more like 1.40, so literally almost 14 times more and it's because the funds in most plans have the underlying fees to either pay a commission or to pay a revenue share, right? 

It's not that any company, if you have ... I have brought on a lot of dentists, it's their very first 401k plan, so they have no assets and they have five employees, they are getting the exact same fee structure and benefits than a company with $15 million in assets and 500 employees. It's the same thing. Invariably if we went into your neighborhood, Howard and we had a barbecue and we started talking about 401k plans, there are people here on your street paying 10 to 15 times more for their 401k purely because of where they work and how they were sold something. Sold something that says you don't qualify this or that, this is what you can get. It becomes believable, right? Then people start thinking it's fact. 

I have peers on Dental Town, elsewhere, other great registered investment and buyers around the country doing things philosophically the same way. They're using the same core structure and it's really they just decided that they reverse the order of who should benefit first and the benefit first, in this case the dentist and his employees. Not any other provider.

Howard Farran: Thank you for answering so many questions on Dental Town, I mean I'm a big fan of yours, I think you have half a thousand posts? 

Tom Zgainer: A little over 640 I think, right around there. 

Howard Farran: I want to thank you for that because you're so helpful in answering so many questions. By the way, how do people listening contact you? They can go to Dental Town and do a search for your member name, Tom Zgainer, Z-G-A-I-N-E-R and your website is What does the K stand for, did you ever figure ...

Tom Zgainer: It's part of the tax code, of 401k. 

Howard Farran: 401k, so I want to ask you a couple of questions for the listeners out there. Young dentists are huge into Podcasts, more so than the older grandpas like me. A lot of them are wondering, you know I was looking at a lot of the questions they ask you on Dental Town but if you have $250,000 in student loans, you're 25 years old. You just bought a practice that costs $400 to $600,000, you're pregnant, is that a time to start the 401k? How do you balance that in the scheme of things? 

Tom Zgainer: Yeah, it's a difficult one ... how do you look at your near-term obligations and your long term expectations? When I was in my 20s, I was thinking, wow my parents are really old, my grandparents ... it's so far away for me to get that old. Now in the blink of an eye I'm 56. It just goes by like that. Now even more so these young folks that are in the 20s the 30s, their life expectancy is reaching upper 80s, mid 90s, right? We have to think double perspective, how do we find a balance but we ... our obligations are today but the irrefutable fact are that we may have 25 to 35 years of life after work, where we're going to need financial resources. 

If you ask a baby boomer today where their biggest fear is, it's not passing away, it's out living their financial resources. The young dentists should be taken heed of that fact as well, right? Even if it's a nominal amount, we did a Podcast yesterday ... a webinar yesterday for close to 200 dentists that requested information starting a 401k plan for the first time. Kind of the same position, right, that we met at Cerec 30, and part of that was, keep it in perspective. 

If you have $1,000 of remuneration and even if you put just 5% of that away, that's $50. It just gets you into the habit of starting to save. Maybe that will diminish how many Starbucks you have or what you do recreationally on the weekend because if there are discretionary dollars being used to enjoy life, a part of it really ought to be saying, but I have life later, right? I have life now, I have life later, how do we balance the two? It's really difficult. 

I spoke to one yesterday who said, for eight years now, my wife and I been kicking around the idea of setting up a 401k plan. We bought a building and we just finished off paying loans and he said, when we heard you guys speak at Cerec we realized, we have to do this also. It has to an also, not instead of. It's a tough act. 

Howard Farran: I remember on two classic books, this is 2015 I'm 53, I think these books came out maybe in '80, or long, long time ago, I think I read them in college. One was written by two PhDs, The Millionaire Next Door. The other one is an ancient book, The Richest Man in Babylon. The Richest Man in Babylon was talking about importance that you pay your savings first, you pay yourself first because when you don't pay yourself first, that extra money you start building up a higher expensive lifestyle.

Tom Zgainer: Og Mandino, Og Mandino wrote that book. Richest Man in Babylon, right? 

Howard Farran: Yeah.

Tom Zgainer: And all these other ones, the underlying thread was all that was pay yourself first, right? 

Howard Farran: In The Millionaire Next Door what just blindsided me is, this guys would just ... these were two PhD's showing datas and they were showing that teachers had one of the highest percentage of millionaires and they had very low income but it was that they had even lower lifestyle. 

Tom Zgainer: Exactly.

Howard Farran: Dentists have a problem with having a lot higher income than teachers but they seem to have to have 5,000 square foot home, a Mercedes Benz, a Beamer, a boat, you know and I tell them all the time that, you don't want a boat, you want a friend with boat. Why do you need to buy a boat? Why do you need to be a condo, when you could just go there on vacation and rent it for a week? Why do you have to own it? Then it's ... they, the secret to, a big secret to retiring rich is having a lower cost lifestyle. A lot of that's by getting rid of your money first so you don't see it, so it's not in your pocket so you don't run out and spend it. 

I want to ask you a couple specific questions. A lot of these guys driving to work, a lot of these guys and gals, let's say that Sharon's listening right now and she's a 50 year old dentist and she's thinking, how much should I have put away already? I mean where should she be at, at maybe 40 or 50 or 60, if you're saying that she may live 25 to 35 years after she retires. Do you have any benchmarks of where older people ...

Tom Zgainer: Really you should be, when you start thinking of saving for retirement, close to 50% of your expected financial resources should be from you saving for your retirement. Granted it will be social security around, most of us are going to expect to see most of that, right? There'll be a handful of us that marry into wealth or Uncle Charlie leaves us his estate.

Howard Farran: Do you have any leads, any names, any women that you know of? If some woman comes in with a huge 401k and she's single, can you post the leads on Dental Town so we can ...

Tom Zgainer: No knowledge of that, such rare ... it's up to us to do it, right? We talked about in Las Vegas a couple weeks ago. What Tony focused on was you have your security bucket and you have your growth bucket and you have your dream bucket. It's nice to put the boat or the place on the beach in the dream bucket, by all means, we want to enjoy life, right, but your security bucket has to be something that you are planning for when you need it, right? The security of, I want to live a comfortable and dignified retirement after I stop working but then I also to have a growth bucket. Your growth bucket is obviously going to have more risk associated with it, right? 

You're going to invest in more aggressive type investments. Generally as you're younger, when you have chances, the opportunity to go ups and downs in the markets, right? When you start thinking about what do I really need, if you start measuring it out into terms over 30 years ... let's say you back in ... you're going to live for 30 years after you retire and you want to have $100,000 lifestyle, going on the presumption that hopefully you've managed your finances well. Your debt level is very low or eliminated, maybe you don't have a mortgage any longer. You've downsized to a certain extent, so it really comes down to your necessities. You have to cover your basic living costs. You have to cover your medical component of things, food, right? 

We also want to have a little fun in life. You want to be able to travel, we want to do things with our kids, our generational expectations, all those kinds of things. How you back into what is that number going to be for you? It's hard for us to see, when we're spending money at a rate we do today, like you talked about, boats and cars and everything else. Probably when we get older, we're going to say, do I really need all those things, right? I don't need the maintenance of them, I don't need the associated insurance costs or whatever. I think you got to be thinking, regardless of your age, that at least 50% of 25 to 30 years of income. Let's say you live for 25 years and you want to have $100,000 available a year, so we're at 2.5 million, right? Somewhere about half of that, or three quarters of it, has to be from you self-funding your retirement and having it grow over time. Which comes back to the young dentist. 

Start early because that 50 year old you mentioned, she's behind the eight ball. If she's been planning for retirement along the way, well now she's getting a little bit closer to retirement age. Her advisor might suggest a more conservative mix, not so much growth, not so much aggressiveness in the underlying investments because you want to preserve what you've built. A doctor who's in his late 20s, early 30s has a 30 year horizon of work ahead of him or her, you have to have some growth in there. The only way you're going to get growth is to contribute into it and let it start to work for you. 

They should really sit down and put a piece of paper and say, one day I'm going to be 60 and I'm going to stop practicing dentistry and now I have 25 to 30 years to deal with. How much money am I going to need per year? Then you start backing it and saying, well maybe that extra BMW payment now, I downsize it instead of paying $900 a month, I get a BMW that's cost me $450. I'd that $450 I'd put it in my 401k every month and let that start to compound and grow, but they sit down and need to ask themselves, the outcome when I'm older is it going to be as fun as when I'm young and it's not going to be if we don't have the resources. 

Howard Farran: You've answered 600 questions on Dental Town, to the viewers out there who haven't read all 600 of your answers, is there any common theme to the questions. What do you think dentists are mainly ... from answering 600 questions you kind of got to get a feel for what dentists ... what the issues are with the mind of a dentist. 

Tom Zgainer: I would not go to my dentist and ask him to change my tire on my cars, right? What I would say, with respect but I've also had to correct a lot of posts, is that your peers in dentistry may not be the best resource for you to go to for your retirement planning or your retirement planning design. Now I'm not speaking about this investment or that investment, right? Dentists like to talk shop about, I invested in this and I invested in that, that's ... I understand that, but a lot of times a lot of my questions have been around plan designs or certain rule sets or things you can and cannot do, or my broker said I can do this or my TPA said I can do that. In some cases it's not really that correct. I would suggest that you would consider staying in your own lane, right? 

If you're practicing dentistry and that's your level of expertise and you might have an ancillary level of expertise, right? My neighbor comes to me next door and says, "Tom, I have a tooth problem." I am not going to say, "I stayed at a Holiday Inn last night and I think this is how you should do your root canal," right? My mouth is shut on the topic, but I am going to contact my dentist and say my neighbor has a problem. I think that's one thing that they should consider. 

Two is, a lot of dentists muddy the fact that their broker is a retirement plan expert. In most cases, the two do not go together. Here's why, there's about 170,000 brokers out there in the United States. Most 401k plans have been sold by brokers. 

Howard Farran: 170,000 401k brokers?

Tom Zgainer: Brokers in general, not necessarily 401k. A broker is a registered representative. A registered representative cannot be a fiduciary to the plan, cannot provide advice to the plan, but can make commissions on the plan.

Howard Farran: You're not talking, this doesn't include real estate brokers?

Tom Zgainer: No, talking about financial services brokers. 

Howard Farran: There's only 150,000 dentists, so the country has more brokers than dentists. 

Tom Zgainer: Now here's the problem with that--

Howard Farran: That doesn't seem right, it doesn't seem like it should be that way. 

Tom Zgainer: It's like real estate brokers, there's a lot of real estate brokers that are not selling any houses at all and there's a handful selling a lot, right? You can say I'm a real estate broker, but if you sold two houses a year, is it really a career, right? The problem is most of the 500,000 or so 401k plans out there have in one form or another a large percentage, probably 70% or so, a broker is touching that plan in some way. 

Here's the problem, about 70% of those 170,000 brokers have one or two 401k plans under their belt. Meaning the kind of ... we call them blind squirrels, right? They fell into a neighbor or a friend who had a need and they're like, oh I can help you with that. They're trying to get really wealthy on that one plan, so it's loaded up with these heavy fees inside of an insurance plan. Most of the dentists we speak to are with one of those guys now. Where they have one to five or six clients' 401k plans. 

That's a good half day for us, so what they do in their career is a half day for us, as far as volume of business. Taking counsel of a broker to be a 401k plan or retirement plan expert are two different things. A lot of the guys on Dental Town rail against salesmen, right? They don't like that word.

Howard Farran: Yet they're all salesmen. 

Tom Zgainer: Yet they all are in some ways. We look it as somebody has to convey what this thing is. In this case, a retirement plan, if it's good or not good for you. It might not be a 401k plan. It might be a Simple plan, capital S-I-M-P-L-E, it might be a IRA, it might be a SEP, it might be anything for the time being, right? When you look at each particular client, if they don't have a plan, it's what's best for you now and it goes back to your point of buying houses, buildings, I have loans, should I even do this now, because there's that delicate balance. 

For those that have 401k plans, nine out of 10 have partnered with somebody who is not a fiduciary, who is getting paid commissions, where the platform is with an insurance company, who's also getting paid fees and they are completely unaware of the plan that they're in and the effect it's going to have over time. A lot of my posts around there and it's hard to bridge not getting biased and stayed off it, not trying to get sales-ie also, although sometimes I get close. My good friend Tim Lotto slapped my fingers once in awhile and today I know if you're out there Tim, you're boasting because the Ravens beat the Steelers. That will be a bone of contention later in the day. 

Howard Farran: You're in a surprisingly good mood considering the Steelers got crunched last night and you saw, what every one of their games from what years to what years? 

Tom Zgainer: '72 to '81 I missed one game. 

Howard Farran: They lost last night. 

Tom Zgainer: There's other things to worry about in life. Seven hundred and fifty some dentists requested a proposal three weeks ago at Cerec, there's a little bit other things to worry about, right? The bottom line to the thread of [inaudible 00:33:54] is that probably four to five dentists contact us a week from all of these postings over Dental Town. We love helping them. What is really cool, I think is that since we launched America's Best 401k in August 2012, every client that joined us is still with us. Zero attrition and one out of five clients that join us, is a dentist. 

We really understand and know this lane. Are we going to be the right fit for everybody, by no means, right, because we can't be local. A lot of folks ...

Howard Farran: You're in a dangerous situation because you're ... Dental Town's all about transparency for our industry. The whole motto with Dental Town in 1998 was that no dentist would ever have to practice solo again and I think my dental homies feel safe. You know when you're at a convention and somebody's talking to you in a booth and saying this impression's better than that impression, you're the only one hearing it so you're all alone. When someone's telling you that on Dental Town and you got 202,000 members with you, in the same room, the conversations are more safe. If you're saying something wrong it's more brought out. You have an amazingly awesome reputation on Dental Town.

I want to ask you another question, dentists are readers and all leaders are readers and traveling around lecturing I've seen ... I've spent the night in gosh darn hundreds of dental homes in 50 countries and the difference in spending the night in a dentists home versus anybody who's not a dentist, physician, lawyer is every dentists home has a hundred non-fiction books the Doc has read. If there not a dentist, physician or lawyer, it's one book, Fifty Shades of Grey and a People magazine. They're readers, if someone sits there and says, when I get done finishing this new Pathways to the Pulp by Stephen Cohen, just came out with his newest addition in the book [inaudible 00:35:49]. When they're done with their next dental book and they want to read a book on this to try to get perked up before they talk to your whatever, what book would you recommend and would you recommend Tony Robbins new books? You were mentioned that Money Master The ...

Tom Zgainer: Money Master the Game.

Howard Farran: Master the Game. 

Tom Zgainer: Here's what's ...

Howard Farran: What would be your short reading list for someone who's sitting there thinking, I don't know the difference between a 401k, a Roth, a SEP, a Simple, I don't know any of this stuff. I am a reader and that's what got me out of dental school. What's your short reading list? 

Tom Zgainer: I'll put that one, not to be self-publicized, the book itself though, Money Master the Game, well over a million copies sold. Tony went out and interviewed 50 of the finest minds in the world financially. These are not his opinions in this book. 

Howard Farran: Including Vanguard.

Tom Zgainer: John Bogle, in fact a few weeks ago Tony and John Bogle from Vanguard were on the cover of the inaugural edition of 401k Specialist magazine. The fight for low fees. It's a really cool picture because you've got John Bogle, who is the original voice of saying, the best and most easiest thing you can do to increase your outcome in your investments is to lower your fees. He's the champion of that, right? 

Howard Farran: Right.

Tom Zgainer: He's getting near 90 years old, right? You've got the cover of John sitting in the chair and Tony standing next to him and it's almost like a torch is being passed. It was really cool. We were the only company mentioned in that magazine but that's just one off, right? The thing about Tony's book is that there's these thought processes from so many great minds across the entire spectrum of financial resources. There's some things in there for you and some things that are not. 

A little side note to this, is that every dollar of the proceeds of the book is gone to Feeding America, the largest organization to help people who are in need of meals in the United States. Every dollar, I believe close to 90 million meals have been provided from the proceeds of the book already. As I mentioned earlier, more dentists by profession, one in every five dentists comes to us, more dentists by profession have contacted us after reading Tony's book than any other profession. It's astounding. 

Howard Farran: They're readers. 

Tom Zgainer: They're readers, right. There's a great book out there now called The Innovators by Walter Isaacson who wrote the great book on Steve Jobs. This kind of gives you mind into Silicon Valley on some of the companies and the thought processes that went to building these companies and how they built their reputation and how they failed in some cases, right? 

When I look at my reading and even on the guys on my team I try to tell them on a regular basis, you have to start your day and you have to end your day reading. Books are one avenue but we now have things on our tablets and our phones, you know Flipboard, for example or Pulse, where you could bring in the top stories from 60 or 80 different publications every day and pick the topical items. Even Apple has their new, with the new release in their iOS system last week, they have a new news feature, right? They're kind of replicating what Flipboard and Pulse does. 

You can get your eyes and your ears on things that might have something relative to your business. The way I look at it is, you can't stop reading. You cannot ever stop reading and I'm not talking about your profession but the periphery of your profession. If I'm a dentist I want to make sure that everybody on my team knows how to answer the phone properly and that they engage because they are, in fact, selling, right? 

If I'm referred to you Howard, because I understand you're a great dentist and my neighbor said to call, and I get a less than comfortable experience from the very first person that picks up the phone, there's already hesitation, right? I'm going to give it the benefit of the doubt because my neighbor said you're a great dentist, so I'm going to call again. I hope that experience is improved and so it's things like making sure, not just you but your team, who are your sales reps. They are your sales rep, they're welcoming people with a smile. You want to make sure the office looks good. 

When we were at Cerec a couple weeks ago, Dr. Craig Spodak, phenomenal speaker, phenomenal practice in Delray Beach, showed some pictures of practices, how the offices looked in some practices and some in others. The first couple were showing some rust and some dated calendars and some chairs with broken leather. He showed other types of offices and you immediately feel if I walk into this environment, clean, up to date, fresh, I feel better about a hand that's going to go into my mouth as well, right? 

It's things about, not just your profession but the periphery of the profession. I think no matter what business is in, you have to read to keep up. You just got to keep up with it. 

Howard Farran: That's true. I went to my doctor, Dr. Kevorkian and the office was so outdated that I just walked out. 

Tom Zgainer: I'm out of here. 

Howard Farran: I'm out of here. Any other specific book titles that you think a young dentist might like? Would you recommend starting with Tony's new book?

Tom Zgainer: Tony's new book gives you philosophical viewpoints on everything related to everything financial. He then references a lot of others that you would then pivot out to read as well. 

Howard Farran: After answering 600 questions on Dental Town, do you think there's any books that those Townies if they would've read they wouldn't have asked those questions? 

Tom Zgainer: A lot of folks are drawn to things like the white coat investor. You know who posts a lot, you've got some really great ... and he pools in from a lot of resources, right? If we're talking about things financing, finance, those are the sites to read. Books so much ... books in a way, as much as I love them and I was telling somebody this story the other day that before I moved west in '82, I worked in a steel mill in Pittsburgh. With the primary thing that would not ... were not allowed to do in that steel mill was read. Reading would be a cause for getting fired. Mainly because they didn't want ... you didn't want to take your eye off of something coming down the mill that can kill you, right? 

I was fortunate to have a little office where if I snuck myself right into the corner as tight as I possibly can, you couldn't look in this window and you couldn't look in this door window. Down there in a heater, it'd be like 30 below in the winter or 150 in the summer, right, because of all the mill there. I smuggled in probably close to 400 books over three years. That became the basis for everything I started to learn in my business career. It was on every subject possible.

The great ones in history, the Thinking Grow Riches, Napoleon Hill's and the Law of Success and W. Clement Stones and the Og Mandino's, everything he wrote, to go what I liked directly and what I didn't like indirectly, where I would be forced to go out of my comfort zone. I think the more you can read, the better you can read. Those were the kind of days where even though I knew I could get fired, I knew I was ultimately not work in this mill and I was going to move to California and start a different life and I had to be prepared. It was a worthwhile trade off for me to bring in three or four books a week, knowing that if I got caught it was going to be part of a problem, right? 

Reading is so fundamental and sadly I think generationally now we see everybody looking down at their texts, we like small snippets of information and so that's why I think maybe not just books, using these news readers that are available on so many topics, allows you to read an article that's important to you or a study that's important to you, right? Some results of some whatever underlying survey that was occurred, right? To be cognizant of facts and figures to use in the course of your business, that I think is really important. 

Howard Farran: The dentists listening to you right now, what is the exact specifics on how and the cost for them to have you evaluate what they have, to bring those fees ... how does that technically work? How much does that cost? Talk about that. 

Tom Zgainer: There's no cost for us to analyze their plan. This is part of what we do is the foundation and the structure of what our business model is. Again, it's going back to, we're not trying to get wealthy on a plan. Are we a profitable business, yes. Are we wanting to make a buck, of course, but we're doing that with volume over many clients. That's why every client, no matter the size, it's the same, critically important. We're not judging you based upon you have a new plan or a really big plan. 

The first thing we want to attack is, actually two aspects, if you do you not have a 401k plan, we want to understand why. We'll gather your census, we'll create some illustrations, we'll show you some figurative examples of, if you start to save now this is where you can be heading. That's at no cost. We do those illustrations at no cost. 

If you have an existing 401k plan, as I mentioned earlier, you are required to do an annual benchmark of your plan against competitors. Your existing provider will never, ever do it for you. They may go out and get other proposals but not a benchmark. Here's a critical factor of difference, if I go out and get other proposals from competitors today, it will be numbers on a piece of paper, right? Here's my fees, here's your fees, okay this is better, this is worse. That's only one thing. 

We, though, in our fee comparison, we add to the element of time because if you take your existing 401k plan, let's say it has a million dollars of assets and you're contributing $100,000 per year, so those are two critical factors. Then we come up with a figurative return rate, let's pick 7%. Those things by itself mean nothing until you add time into it. In this comparison we then show in five year increments, out 20 years, if you stay on this path with your plan, as compared to ours or another, this is going to be the outcome. The outcome is going to mean you're going to have a significantly less amount in total plan assets to be used for when you need it most at retirement. In most of these plans than with us. 

We want to do that comparison first. We send them out a proposal but the comparison really is the key. The financial points are really very simple. There's no conversion fee to setup a plan or start a plan. No conversion fee whatsoever. Most providers $500 to $1,500 to establish one. We don't charge a conversion fee at all. 

Howard Farran: Is that what you call a rollover? 

Tom Zgainer: If you had your plan at XYZ Insurance Company and you move over to us, you're converting the plan, right? The assets are not necessarily ... a rollover is more if you were, you used to work for Joe employer over here and now you work for Bill employer over here, you want to roll over your personal assets. That's more of a rollover. When you're bringing over the entire plan from one provider to another, that's a conversion, transferring over the totality of it, all the assets, okay? 

We don't charge a fee for that. Annual fees ...

Howard Farran: Is it a person that you ... that your conversion over, do they charge an exit fee? 

Tom Zgainer: Often times providers will charge a termination fee but we ask folks to push back on that. Why, we're like look, you've made a lot of money on us along the way, you've made plenty. You don't need to make more now or if they charge $1,000 fee, say the same thing and say, we want this cut down to 500, or if it's with a national payroll provider, say, we're going to move payroll if you don't waive this termination fee. Ask and you may receive, right, so you might as well try. 

On the financial side of, what does this thing cost, it's all the same, $1,600 a year for complete administration and record keeping. All the things that have to be done to manage the plan, including the design component, profit sharing illustrations, the annual testing and tax returns that occur. All the record keeping throughout the year, $1,600 a year. If it's an existing plan there's also a $24 annual per participant fee, that the dentist can pay or he can pass it along. Those are the hard dollar costs. Invoice fees will talk, okay and then on the investment related fees, there's three components, you have custody of the assets, so the assets have to be held somewhere in the trust. You have the average cost of the investments themselves and then you have our fee to serve as the fiduciary. 

The average cost of the funds in our plan are .12, as I mentioned earlier. Custody of the assets is .08 and then our fee is .30, so totaled up that's one half percent, .50. Keep in mind where we're bringing most plans from, they were one and half to two and half percent all in and we're taking them to .5. Whether you consider us or not, these are numbers you have to know. You deserve to know, not just for yourself and your family but where your employees might be heading as well. 

Howard Farran: Given the hard checklist, I mean what should they do, should they go to the office and get their last form and ...

Tom Zgainer: The easiest thing to do is to go to our website at, top right corner it says request a proposal. When you request a proposal and you say you have a plan, they'll be a little drop down that says, proposal comparison or both, select both because we want to show you what we can do for you but we also want to compare to what you have today. 

Once we engage with them, now we know their contact information, their phone number, their email, we'll then send our first follow up email where we say, here's exactly what we need, go to your provider and ask for this very thing and send it to us. Then we get it and we'll turn around the next the day or so and give them that side by side comparison. 

Howard Farran: What if they wanted to talk to you? 

Tom Zgainer: That's when they'll engage with a member of our sales team. We have five guys in San Hose, five guys in Denver, everybody's been in the business for a really long time. We really know our jobs and so either myself or some of the members of the team will contact them directly. We usually set up ... we have a really beautiful system, it works fantastically effectively. Right when you request your proposal, as soon as you click submit, a screen pops up and says, while you're here let's set an appointment to talk. We use this thing called time trade, it's the best $49 I've ever spent in my life, so time trade what it allows me to do is take my schedule out eight to 10 weeks and I block off times. When you click that button, you're picking a time good for Howard, not good for Tom. Tom already determined it's good for me, right? 

In my calendar my appointments generally start at 6:00 am. Pacific and they're all 30 minutes and we really get to the point, so I know how dentist work. They're dashing between patients, sometimes they have an emergency all those kind of things, right? We are using that time very effectively. We use the first few minutes to understand the basics of their scenario. The next 20 minutes to dive into it and use the last 10 minutes for action items. If they have to contact providers to get some more information or whatever, we give them that time to do that. 

Dentist love it because we're considerate of their time and we're really on point on those calls. Request a proposal, establish an appointment, let us engage with you, we come to conclusions really quickly. 

Howard Farran: How many steps into that is free for them to get the ... the proposal's free?

Tom Zgainer: Free, free, free and free. 

Howard Farran: Free, free, free and free. 

Tom Zgainer: This is our model, our model is to serve, not to charge for service before we've done anything. We need to be sure that when we engage, we're engaging on a parallel path that is good for all parties. The first point is, is we want to bring clarity. They do not have a diagnosis on their 401k plan. In almost all cases, they don't have a diagnosis and yet there could be something festering in there that's really, really bad. That's the first order of business, find this out. Then from there we determine, do you want to move forward? We've got to find that out first. We have to see the optics. We have to do the diagnosis. 

Howard Farran: If you're out there, you're a dentist who doesn't want to make decisions alone on something that's not their core [inaudible 00:51:20] what areas ... there's 51 different forms on Dental Town on root canals, dentures, what forms are you ... mostly on where this is mostly talked about? 

Tom Zgainer: Personal finance. 

Howard Farran: Personal finance? 

Tom Zgainer: For the most part and then sub-sections of retirement plans, that's so ... all my posts are within personal finance because that's where most of the conversations start to get themselves. Then it's interesting because some posts will resurrect themselves after a year, which is really cool, right? Some topic will draw somebody and something came up and boy it just goes off again. There's certain times I can see, like Saturday morning seems to be a really big time. 

Howard Farran: Really? 

Tom Zgainer: It seems to be like a topic will go, it will just catch on fire on Saturday mornings. It just seems an interesting time, as well as Friday, which we're trying to be cognizant to the dentists schedule as well, so I think today, Friday, between four of us there's close to 36 or 38 appointments with dentists today, as a result of the Cerec conference. 

Howard Farran: On Dental Town there's 202,000 members who have posted four million times from 206 countries, is what you're talking about just an American play? I mean if you're listening to this and you're from Canada, England, Australia, New Zealand, Africa, Latin America, is this ...

Tom Zgainer: Yeah, it's interesting you bring that up because as a result of Tony's book, we have people all around the world saying, can you help us? If we look at the English speaking countries, Great Britain, they're currently going through, they call them schemes, they call their retirement plans their schemes, which is a really nasty word in the US, right? 

Howard Farran: I know, I know.

Tom Zgainer: You can see why they call them schemes there, because they had a proliferation of unnecessarily and needless fees in the UK environment as well. Their Minister of Pensions what have you, earlier this year has created this scenario where fees cannot go beyond this point very soon. Great for that market, right? You're kind of out on your own over there, you have to contribute to it whether you want to or not. We don't have to contribute in the US, that's a big problem. One of the reasons why other countries are really more prepared for retirement is forced savings, mandated. We're relying on Social Security. They're forcing you to also contribute and in many cases, forcing the employer to contribute. 

You might call it socialization, what have you, but I tell you what, it's leaving people better off when they start to retire. 

In Australia they have these things called superannuation plans, that are kind of this hybrid as well. Kind of like a really blown up IRA, but you have to contribute to it as well. The bottom line is no matter what country you're in, whoever your provider is, you should say, there's nothing more important related to your money than knowing how much you have and where it is. If where it is, is invested, how much is the investments costing you, right? 

No matter where you are in the world, no matter the vehicle you're investing in, you should go today, or next week or early as you can, to your provider or broker or advisor or whatever and say, I'm investing in this, what exactly does it cost me and I want you to show me if I stay on this path what it's going to cost me over time? No matter where you are in the world you ought to know that. 

Howard Farran: Speaking where my money is, I invested half of my money into my ex-wife. I thought that was a very good investment, so in the nutshell you can help a person in London and Sydney Australia?

Tom Zgainer: I have contacts in both places, in fact through my relationship with Tony we were heading down a path to do some work in the UK. We have some partners there we'd like to work with. Actually through Richard Branson's company through Virgin Money, we've already been in contact with them, but the systems are different. The rule sets overall can't be translated exactly the same. 

Howard Farran: All right. 

Tom Zgainer: We're keeping our eye on things to make sure that if we can help, we'd like to because certainly if you could have a global influence on people's finances, like Tony's book has done, by all means we'd like to contribute. My style is not to say I can't help you, no matter where I travel to, if I'm standing on a corner and somebody asks me directions, I'm not going to say, I'm not from here. I'm going to say, let's figure this out together. That's the way we approach our business every day. 

Howard Farran: That is awesome and I ... like I say, I'm a big fan of your posts on Dental Town. It must an honor to be mentioned in Tony's new book. 

Tom Zgainer: It's very cool. 

Howard Farran: You're at the top of your game and I appreciate you coming over today since we live in the same town. I wanted to do this in the flesh instead of via Skype. Seriously thank you for all that you've done for dentists on Dental Town. Thank you for answering so many questions. Everybody that went to the Cerec 30 event in Vegas just thought you were a rock star. No need to practice solo again, you can talk to this guy in front of 200,000 people in Dental Town or you can just go to and obviously since we're talking about finances I'll just say it, but obviously I never have any money connection with any of my guests or anything like that. This is just all sharing. Thank you for sharing so much today. 

Tom Zgainer: My pleasure, Howard, very grateful. 

Howard Farran: All right, thank you.

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