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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
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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 more clear 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 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
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
• 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
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
• 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
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 .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%
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?
– 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?
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?
– 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?
How to Rate a Service Provider
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