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Are Your Advisor Fees Reasonable? How do you Know?

 

At a TPSU program held at UC Irvine, the head of HR at a 200 person healthcare real estate company discusses issues with determining whether their advisor fees charged by their 401k plan advisor are reasonable.

As with all fees paid to service providers like record keepers, plan sponsors have a fiduciary duty to ensure that their advisor’s fee are reasonable based on the service provided and what other comparable advisors might charge. The HR professional at the TPSU program was very happy with their advisor who charged a flat fee rather than a percentage of assets, but when the advisor proposed an increase, she felt it was necessary to determine whether the fees are reasonable.

Rather than rely on published benchmarks that provide grids often as simple as fees charged by advisors based on plan size, the HR director has decided to do an RFP using a third party to help.

Senior management, who do not have as much interaction with the advisor, also wanted to determine whether the advisor fees are reasonable not just because it is their fiduciary duty but also because it is a good business practice.

So even though the HR professional was very happy with the services provided by their advisor and did not think the price increase was unwarranted or unreasonable, she was uncomfortable just accepting the increase without investigating further needing more information that a simple benchmark supplied by the advisor suggesting the increase.

Infinitely more plan sponsors conduct periodic RFPs for their record keeper than their advisor because the advisor does the heavy lifting for the record keeper but cannot help with the advisor RFP for obvious reasons. Plan sponsors need help and professional guidance which is why 401kTV makes an advisor RFP service available through a qualified third party, InHub available on our website.

Are your advisor fees reasonable? How do you know?

Fred Barstein

Fred Barstein

Founder & Editor-in-Chief at 401kTV | TRAU | TPSU
Fred Barstein is the Founder & Editor-in-Chief of 401kTV. Fred is also the Founder and CEO of The Retirement Advisor University (TRAU), a collaboration with UCLA Anderson School of Management Executive Education and The Plan Sponsor University (TPSU).Mr. Barstein was also Founder and Editor-in-Chief of NAPA Net.
Fred Barstein
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