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RETIREMENT PLAN INSIGHTS
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Fee Disclosure May Uncover Hidden Issues
James Lorenzen, CFP®, AIF® | April 17, 2012 |
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If you're wondering why some retirement plan providers are magically discovering new savings for their plan sponsor clients at the same time other providers, many of whom are bundled insurance company programs, are simply looking to exit the retirement plan marketplace altogether, the reason is simple: Fee transparency.
Those providers have found their answer; but, plan sponsor fiduciaries don't have it so easy. And, many, for the first time, will discover that the investment fees they've been paying aren't just for the money manager.
To me, the ideal breakdown might look something like this:
|
Entity Paid |
Fund #1 |
Fund #2 | |
Money manager |
0.35% |
0.62% | |
Record keeper from sub-TA |
0.40% |
0.00% | |
12b-1 for broker/rep |
0.25% |
0.00% | |
Other/Custodian |
0.09% |
0.02% |
If you assume all recordkeeping fees paid by the plan total 0.35% and you've documented that the fees are reasonable in light of the services provided, the comparison chart may highlight the fact that the participants in one fund are subsidizing the costs for the holders of the other. Should a fiduciary feel comfortable about this?
Addressing this issue now, ahead of a complaint or law suit, might be worth some real money! Plan sponsors would be wise to fully understand the importance of acting proactively in evaluating provider disclosures before someone else does.
Putting the RIGHT plan in place - the one that's truly right for your participants - might be easier, and cheaper, than you think!
Jim
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 About IFG
The Independent Financial Group is a Registered Investment Advisor providing retirement plan investment and fiduciary consulting to plan sponsors on a fee-only direct-payment basis. IFG acts as our client's advocate in the financial marketplace, providing independent and non-conflicted guidance. IFG does not sell products, earn commissions, or accept any third-party compensation or incentives of any description. In adition to benchmarking, provider searches, investment due-diligence, and fiduciary services, IFG helps plan sponsors organize and maintain required documentation.
About Jim Lorenzen, CFP®, AIF®
James Lorenzen is a CERTIFIED FINANCIAL PLANNER™ and an Accredited Investment Fiduciary® in his 20th year of private practice with clients located in New York, Florida, Colorado, and California. Jim has been a headline speaker on financial and organization development topics at more than 500 conventions throughout the United States, Canada, and the U.K. His articles have appeared in more than thirty publications, including The Journal of Compensation and Benefits, The Profit Sharing Council of America's Insights, and The National Management Association's Manage. He's also been interviewed on American Airlines' Sky Radio and by The Wall Street Journal for Smart Money magazine. More about Jim here.
Accredited Investment Fiduciary®
AIF and AIFA Designees have successfully completed a specialized program on investment
fiduciary standards of care. The curriculum is conducted by the Center for Fiduciary Studies in association with the Joseph M. Katz Graduate School of Business, University of Pittsburgh. Created by Fi360, training began in 1999 to provide the investment industry with the first full-time training and research organization focused exclusively on investment fiduciary responsibility and portfolio management. Designees are required to complete a rigorous training program, successfully pass an examination, conform to a code of ethics, and adhere to continuing education requirements on a yearly basis. These requirements ensure Designees are familiar with the prudent process developed by fi360, as well as kept up to date with recent industry events affecting fiduciaries.
About RPAG
In order to provide IFG clients with the highest standard of `best practices' and institutional-level services, while still maintaining a conflict-free independent environment. IFG has retained Retirement Plan Advisory Group (RPAG) to serve as a `back-office' consulting and technology resource. RPAG provides IFG with highly experienced `back office' of consultants and a state-of-the-art technology platform that support both IFG and plan sponsor clients. The RPAG network includes 350 member firms in 45 states serving approximately 20,000 retirement plans with $65 billion in assets. In short, everyone wins: This back-office support in design, ERISA issues, education, and technology allows The Independent Financial Group to provide institutional-level service without the conflicts of in-house product vending or hidden compensation arrangements.
About This Newsletter
Plan Sponsor Insights content represents the opion of the author. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.
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