Fiduciary Standards

Engineering Quality Investments

Bridging corporate and private client services

The SECURE Act became law on Dec. 20, 2019, with the intent to make it easier for small business owners to set up retirement plans. Short for “Setting Every Community Up for Retirement Enhancement,” the legislation also created Pooled Employer Plans (PEPs) effective January 1, 2021 – a form of “open” Multiple Employer 401(k) Plan (MEP) that any employer can join, according to Forbes Magazine.

“MEP supporters claim PEPs will offer two key advantages over traditional single-employer 401(k) plans: lower fees for retirement savers and liability protection for employers.” Forbes noted.

Registered Investment Advisors serving as fiduciaries may also be able to expand their practices by specializing in PEPs, especially when they already have experience with MEPs. And that’s one of the immediate goals of California-based 401K Engineers, a business owned by Paul Marchetti, AIF®. In addition to providing investment and financial planning solutions to private clients, Marchetti provides 401(k) consulting and hands-on services to corporations.

Specifically, Marchetti serves as trustee and fiduciary for the MEP offered by the Sacramento Regional Building Exchange (SRBX), a trade association comprised of about 1100 member companies in building and construction. It’s considered a closed MEP because it’s made up of more than one unrelated employer (with employees) with a trade association as sponsor in which companies have other shared interests beyond retirement savings.

Any retirement plan requires ongoing care and attention, and Marchetti told Advisors Magazine in a recent interview that’s what he brings to the table. He’ll build, reconstruct, and oversee such plans, working with corporate HR departments, CFOs, and other management as well as owners of smaller companies because the 401(k) rules, regulations and day-to-day oversight can be daunting.

richard march“For example, just recently I noticed that the SRBX target-date funds were only okay. They were weakening, so I changed the entire suite of funds and explained my rationale,” he said.

Aside from quarterly investment monitoring and analyzing, other 401(k) plan services might include establishing a retirement plan and management committee, drafting an Investment Policy Statement (IPS), arranging quarterly meetings, setting up auto-enrollment and auto-escalation, reviewing the plan design annually, offering safe harbor options and expertise, and much more.

“Plan fees are known, openly discussed and reasonable,” Marchetti added, “often cutting a company’s costs by a minimum of 40 percent.” He said his firm typically follows the 90-10-90 philosophy, meaning a 90 percent or greater participation rate, 10 percent average employee deferral, and 90 percent appropriate.

The fit with SRBX is a good one because Marchetti is formally educated as an Mechanical engineer. “When it comes to building and construction companies, I know the challenges they face and I speak their lingo,” he said.

He started out at his family’s retail hardware store in the mid-1980s, where he learned the customer always comes first. “Being in the hardware business, I helped people solve their problems. Whatever they needed—that exact screw, nut, bolt or part for a certain project—I liked helping them get things done, creating and coming up with custom solutions.”

Nowadays, instead of helping people build things, he’s helping them build wealth, and he says his practice is pretty much always open. “Clients can call me weekends, whenever—and I’ll jump on whatever it is they need.”

For private clients as well, Marchetti offers estate planning, tax planning, advice on properties to sell and buy, and helping them with virtually anything that impacts their financial lives.

“I go well beyond the portfolio. It’s about relationships, getting involved in a client’s life. I’ll ask what’s causing them fear, or stress, or what makes them most happy,” he added. “I’m not about simply hawking products, and there is no minimum required.”

401kPersonal touches have helped him grow the business, which increased by 22 percent during the 2020 pandemic. Marchetti is not concerned about the rapid growth of robo-advisors and online trading platforms because he sees them as just computer screens or phone displays with no real relationship or connection to clients.

“Staying in front of clients is vital,” he said. “You absolutely have to enhance the customer experience and instill it in all that you do.”

Toward that end Marchetti makes sure to send his clients some goodies on their birthdays. Women get fruit arrangements and men get some baked goods. “And during the holidays, everyone gets my mother’s homemade biscotti,” he beamed.

Around the holidays this year and into 2022, Marchetti is aiming to take to market his own PEP, while continuing to gather more assets under management from SRBX MEP members.
The Pooled Employee Plan addition to his practice is a key goal that will allow him to reach out to diverse companies, from restaurants to barber shops to florists, nurseries and more. He notes that it will be more labor intensive and involve more cold calls than a group-sponsored MEP, but he’s looking forward to the challenge.

Marchetti is awaiting authorization from the U.S. Department of Labor because before he begins marketing a PEP, it would need to be up and running with about 16-20 different investment avenues. “Like the MEP, I’ll run it, be the trustee and handle all the filings,” he said. “And I’ll present it to different businesses that might want to start a 401(k) plan or convert an existing one.”

Still, Marchetti is quick to note that he’s not transactional. For him, it’s all about a lifelong process. “It takes hard work to get a client, but you can lose them overnight,” he summarized.

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