Retirement plan providers need to look at their fees and determining what work they are doing for their retirement plan clients because like me, they may try to break down their plan expenses into a day rate and try to figure out what their providers do for them.
Value is one of the more important concepts in business and plan providers (thanks to the transparency of mandatory fee disclosure) are under pressure to show their value to plan sponsors. By showing value, plan providers have the power to dissuade plan sponsors from every contemplating someone else from taking their spot as a plan provider.
When I talk about the Retirement Plan Tune-Up (the legal review for plans for only $750, cheap plug here), I always talk about the client who asked me to do one for them. Plan was safe harbor 401(k) and administration looked good. On this $14 million plans, broker was being paid about 60 basis points, which was pretty high for a plan of that size. When I asked for any plan education materials, investment meeting minutes, or an investment policy statement, I was told that the broker never provided them to the client. Let’s just say that based on my advice, the broker was replaced by a 3(38) fiduciary for about half the cost. Needless to say, this broker didn’t show value.
Too many retirement plan providers focus on cost and I think that’s not a great marketing plan because saying you’re cheaper isn’t going to turn a lot of heads especially when there is more discussion and concern about fiduciary liability for plan sponsors. Stressing value is a better marketing plan, it shows plan sponsors how important they are and how much liability protection for a reasonable fee by using this provider. A plan provider can always stress low cost in relation to the competition as long as they stress the value of the services provided especially because low fees is often equated with the no frills and plan sponsors can’t afford plan provider that don’t offer frills.
Showing value is one of the most important concepts in retaining clients and it’s better to market it than just saying you’re cheaper.