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Comparing Fees and Services
- 1. Partner Conference 2014 Comparing Fees and Services – Daily Valuation DC Plans Joseph B. Boyle, MSPA Sales Consultant – Mid-Atlantic Region
- 2. Partner Conference 2014 3 • 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 Agenda 2
- 3. Partner Conference 2014 4 • 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 are clearer than others – Marketplace and regulators will punish confusion – “Guide Requirement” 3 Current Fee Environment
- 4. Partner Conference 2014 5 • “Guide Requirement” – Purpose is to improve understanding – Enable Fiduciary to “quickly and easily find” all information required • Fee fairness across all assets • ERISA Buckets – They are legal but BPAS considers them unfair • Benchmarking across all service providers – Financial Advisor – Recordkeeper, TPA and Custodian – Investment Management Current Fee Environment 4
- 5. Partner Conference 2014 6 Age Group 18-29 30-49 50-64 65+ • Not Enough Money for Retirement 52% 68% 72% 42% • Not paying serious illness 52% 63% 63% 50% medical bills • Not maintaining standard of living 46% 51% 61% 42% • Not paying regular medical bills 39% 48% 51% 35% • Not paying normal monthly bills 40% 42% 44% 31% • Not paying children’s college 42% 59% 29% 7% • Not paying rent or mortgage 38% 39% 39% 19% • Not paying credit card bills 16% 21% 22% 14% Source – Gallop Economy and Personal Finance Survey (April, 2013) What Americans Worry About Most 5
- 6. Partner Conference 2014 7 • Total Retirement Outsourcing – HR Outsourcing – 3(16) • Fiduciary Services – 3(38) • Plan Design Consulting and Administration • Competitive Fees – CFO and DOL Services Plan Sponsors Want
- 7. Partner Conference 2014 8 • Single Point of Contact for all Administrative Services • All transactional processing handled by a third party – Loans, Hardships, Payouts • 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 Services Plan Sponsors Want 7
- 8. Partner Conference 2014 9 • 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 Services Advisors Want 8
- 9. Partner Conference 2014 10 • 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 • EGTRRA IRAs – Reduces notice requirements – On DB side, lowers PBGC premiums – May lower counts so no audit is required Services and Features Resonating and Gaining Steam 9
- 10. Partner Conference 2014 11 • 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 Plans Types on our Daily Platform 10
- 11. Partner Conference 2014 12 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 $137,395 or 1.28% Pricing Example & Comparison between Incumbent vendor and BPAS 11 BPAS (Serving as Custodian, Recordkeeper and TPA) • Annual Base Fee Waived • Account Fee ($36) $13,500 or .13% • 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% BPAS won Plan 10/1/2013, converted 1/1/14; Plan Assets of 10.7 million and 375 participants 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)
- 12. Partner Conference 2014 13 • Is the total number of plans they service important? • How important is brand name? • If free education meetings are built in all pricing anywhere/anytime…is that a concern? How to Rate a Service Provider 12
- 13. Partner Conference 2014 14 • 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? – Administrative systems that drive work and processing to Service Provider? – 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? How to Rate a Service Provider 12
- 15. Partner Conference 2014 Contact Joe Boyle BPAS Sales Consultant jboyle@bpas.com 16