Partner Conference 2014 Comparing Fees and Services – Daily Valuation DC Plans Joseph B. Boyle, MSPA Sales Consultant – Mid-Atlantic Region
Comparing Fees and Services
Nov 19, 2014
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Partner Conference 2014
Comparing Fees and Services – Daily Valuation DC Plans
Joseph B. Boyle, MSPASales Consultant – Mid-Atlantic Region
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• 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
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• 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”
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Current Fee Environment
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• “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
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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
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• 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
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• 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
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• 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
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• 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
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• 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
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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
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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)
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• 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
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• 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
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Questions?
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