Comparing Fees and Services in DC Plans - Partner Conference 2014
Explore the current fee environment and service requirements for DC plans at the Partner Conference 2014. Understand plan participants' concerns, what plan sponsors and advisors expect from service providers, and the importance of fee transparency and simplicity. Gain insights on fee fairness, ERISA recapture accounts, recent fee litigation, and Americans' top financial worries.
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Presentation Transcript
Comparing Fees and Services Daily Valuation DC Plans Joseph B. Boyle, MSPA Sales Consultant Mid-Atlantic Region Partner Conference 2014
Agenda Partner Conference 2014 Current Fee Environment Plan Participants Concerns What Do Plan Sponsors Want From a Service Provider? What Do Advisors Want From a Service Provider? Types of Plans BPAS can handle on our Daily Platform Pricing Example Questions 2 3
Current Fee Environment Partner Conference 2014 408(b)(2) requirements became effective 7/1/2012 On 3/12/2014, DOL released Version 2 becomes effective 12 months after finalized Plan Fiduciaries must be provided Description of all services provided Disclose indirect (12b-1 and sub-ta fees) and direct compensation Must be updated annually or when fee changes occur Fee Transparency and Simplicity Some vendors more clear than others Marketplace and regulators will punish confusion Guide Requirement 3 4
Current Fee Environment Partner Conference 2014 Guide Requirement Purpose is to improve understanding Enable Fiduciary to quickly and easily find all information required Fee fairness across all assets ERISA Recapture Accounts They are legal but BPAS considers them unfair Recent fee litigation underscores this point (ABB legal case) Benchmarking across all service providers Financial Advisor Recordkeeper, TPA and Custodian Investment Management 4 5
What Americans Worry About Most Partner Conference 2014 Age Group Not Enough Money for Retirement Not paying serious illness medical bills Not maintaining standard of living Not paying regular medical bills Not paying normal monthly bills Not paying children s college Not paying rent or mortgage Not paying credit card bills 18-29 52% 52% 30-49 68% 63% 63% 50-64 72% 65+ 42% 50% 46% 39% 40% 42% 38% 16% 51% 48% 42% 59% 39% 21% 61% 51% 44% 29% 39% 22% 42% 35% 31% 7% 19% 14% Source Gallop Economy and Personal Finance Survey (April, 2013) 5 6
Services Plan Sponsors Want Partner Conference 2014 Total Retirement Outsourcing HR Outsourcing 3(16) Fiduciary Services 3(38) Plan Design Consulting and Administration Competitive Fees CFO and DOL 7
Services Plan Sponsors Want Partner Conference 2014 Single Point of Contact for all Administrative Services All transactional processing handled by a third party Loans, Hardships, Payouts 180 / 360 payroll integration with recordkeeper Better designs to bring better results for the participant HR and the CFO have different priorities both must be accommodated 7 8
Services Advisors Want Partner Conference 2014 Satisfy all the Plan Sponsor requirements Plan Analytics to help advisors evaluate success metrics GAP Analysis Reports Investment Reports linked to IPS Resources Education and Communication Web Tools Knowledgeable experts Strong Design Capability 8 9
Services and Features Resonating and Gaining Steam Partner Conference 2014 Automatic Enrollment and Escalation Reduces demand for on site education meetings Increases participation and savings rates Improves ADP testing Results Frees up advisor to provide holistic financial planning Support to reduce leakage Retention of assets related to terminated participants EGTRRA IRAs Reduces notice requirements On DB side, lowers PBGC premiums May lower counts so no audit is required 9 10
Plans Types on our Daily Platform Partner Conference 2014 All 401(k)s benefit driven or tax oriented 403(b)s including multiple vendor arrangements Multiple Employer Plans (Open, Closed and METs) KSOPS and ESOPS Taft-Hartley Plans and Prevailing Wage Plans 457(b), 457(f) and 409(a) Plans LOSAPs (Length of Service Award Programs) 1081 Puerto Rico Plans IRAs Defined Benefit and Cash Balance Plans 10 11
Pricing Example & Comparison between Incumbent vendor and BPAS Partner Conference 2014 BPAS won Plan 10/1/2013, converted 1/1/14; Plan Assets of $10.7 million and 375 participants Incumbent (Insurance Company and TPA Service Model) Annual Base Fee $ 5,785 or 0.05% Account Fee Admin Asset Fee $63,130 or 0 .59% Advisor Fee $26,750 or 0.25% Cost of Funds* $41,730 or 0.39% All-in cost BPAS (Serving as Custodian, Recordkeeper and TPA) Annual Base Fee Waived Account Fee ($36) $13,500 or .12% Admin Asset Fee $21,400 or .20% Advisor Fee $32,100 or .30% Cost of Funds* $29,456 or .28% All-in cost $96,456 or .90% $137,395 or 1.28% Note: Revenue from Insurance Company Stable Value not included. Benchmarked Fees: 2014 401(k) Averages Book (All-in Cost) $10,000,000 in assets and 1,000 accounts 1.39% on assets $10,000,000 in assets and 200 accounts 1.14% on assets $10,000,000 in assets and 375 accounts 1.20% on assets (estimated) 11 12
How to Rate a Service Provider Partner Conference 2014 Is the total number of plans they service important? Breadth of plan type capacity? How important is brand name? If free education meetings are built in all pricing anywhere/anytime is that a concern? 12 13
How to Rate a Service Provider Partner Conference 2014 How important is: Robust plan design and administrative capabilities so plans are setup to support client objectives without service capability limitations? Competitive pricing and complete fee transparency? Commitment to independent advisor service model? Knowledgeable and up-to-date workforce on qualified plan rules? 3(16), 3(38), capability with a mindset to go Green? Ability to create CIFs as a way of handling model portfolios more efficiently? Commitment to benchmarking and delivering services that generate value-added services for Plan Sponsors? 12 14
Partner Conference 2014 Questions? 15
Partner Conference 2014 Contact Joe Boyle BPAS Sales Consultant jboyle@bpas.com 16
