We suggest that the plan advisors fees be benchmarked independently every year. We can do that for you. Our report will show your advisor’s fees compared to the services and fees charged by others for a similar plan. The process of review is similar to the Best Practices in place now for reviewing the Plan’s Recordkeeper and Investment Fees: benchmark at least annually. It does not mean that you plan to move the advisory firm to a new one, only that you are checking the fees for reasonableness. A more in-depth review of services and fees through a due diligence process should occur about every 5 years.
A more detailed level of review is an Advisor Due Diligence and/or Search Process. We recommend this be done every 5 years. The service levels provided by advisory firms have undergone an evolution and plan committees who take on this task will discover a wide range of differences in the offerings and the pricing of these services. Most plan committees want robust fiduciary support and protection for their members, and a thorough review of the landscape of firms suitable for your plan and objectives will shine a light on how to best achieve those objectives, and more. We have heard many committee members say at some point in the process; “we didn’t know what we didn’t know!”
We can and we have extensive experience in doing these projects. However, this is a task that is frequently included in your advisor’s service offerings. We typically do Vendor/Recordkeeping Searches for those plan sponsors who don’t have an advisory firm in place, or for those plan sponsors who prefer to have us take a fresh look at their options.
Yes, it keeps the fees from creeping up when you add other companies to your plan, or from getting a higher charge simply because the assets grow. However, if your company is planning on doing a lot of layoffs or in selling off major divisions, it might be smart to consider requesting a fee reduction at certain trigger points, or at least build in the option to renegotiate.
Time. I think today’s HR and Finance executives have more to do in their daily jobs than they did 20 years ago. Given the time constraints associated with their jobs, imagine also having to know all aspects of retirement plans too. Plan Committee Members spend about 8 hours per year attending committee meetings making decisions that affect every single employee now and far into the future.
The best advice I could give a plan sponsor is to choose your partners wisely. Get the best advisory firm you can. Get a specialty consultant when you need one. Hire a good ERISA attorney and have their phone number at the ready. Use a dedicated, results oriented financial education group. An experience plan auditor can provide a wealth of insight—often they are unsung heros! And last but not least, select a quality plan provider/recordkeeper. This team should be at the beck and call of the plan sponsor for any plan issue. Making smart decisions about who the committee relies on will pay off in a myriad of ways, for the employer, the committee and the employees.