Onto the next rule:

“We pay disclosed compensation.  We pay undisclosed compensation.  We don’t pay both disclosed compensation and undisclosed compensation.”

I didn’t originate this rule, and I am not sure who did. I learned it at Provident Mutual from the Senior Executives of Pension Division when I worked there in the mid-’90s. There is a broader rule behind it that I will get to in a moment, but first I want to explain this.

There are many efforts in business, particularly in sales, where some want to hide what they are truly making, so that they can make an above average income off of the unsuspecting. At the Pension Division of Provident Mutual, the sales chain worked like this: our representatives would try to sell our investment products to pension plans, both municipal and corporate. We preferred going direct if we could, but often there would be some fellow who had ingratiated himself with the plan sponsor, perhaps by providing other services to the pension plan, and he would become a gateway to the pension plan. His recommendation would play a large role in whether we made the sale or not.

Naturally, he wanted a commission. That’s where the rule came in, and from what I remember at the time, many companies similar to us did not play by the rule. When the sale was made, the client would see a breakdown of what he was going to be charged. If we were paying disclosed compensation to the “gatekeeper,” we would point it out and mention that that was *all* the gatekeeper was making. If the compensation was not disclosed, the client would see the bottom line total charge, and he would have to evaluate if that was good or bad deal for plan participants.

Our logic was this: the plan sponsor would have to analyze the total cost anyway for a bundled service against other possible bundled and unbundled services. We would bundle or unbundle, depending on what the gatekeeper and client wanted. If either wanted everything spelled out we would do it. If neither wanted it spelled out, we would only provide the bottom line.