Adjunct Lecturer: Shelly Horwitz – Managing Director, Pensionmark
While benchmarking your retirement plan advisor and record keeper is a critical step, it’s frequently overshadowed. The primary culprit? Plan sponsors simply shoulder and juggle various responsibilities that each vie for their attention. The intricate management of a retirement plan, combined with their daily job duties, leaves little time for deep-diving into benchmarking. However, it’s imperative to acknowledge that neglecting this process can lead to unintended consequences, potentially resulting in higher costs, inadequate plan performance, and increased fiduciary liability.
In today’s dynamic retirement landscape, marked by regulatory changes, market fluctuations, and evolving participant needs, benchmarking serves as a compass, guiding plan sponsors through these complexities. It represents a proactive step towards ensuring the retirement plan’s success and aligning it with the best industry practices. While benchmarking might not always steal the spotlight, its impact is far-reaching, benefiting both plan sponsors and the participants relying on these plans for their financial future.
During The Plan Sponsor University (TPSU) Fiduciary Education Program held in Alpharetta, Georgia, Fred Barstein, TPSU’s founder and CEO, engages in a discussion with Shelly Horwitz, a seasoned advisor with over 25 years of experience. They shed light on the significance of due diligence, benchmarking, and Requests for Proposals (RFPs) within the retirement plan industry. The conversation underscores that RFPs and due diligence play vital roles in the effective management of retirement plans. Shelly emphasizes that benchmarking, encompassing record keepers, advisors, and investments, serves as a fundamental component of due diligence. It starts with the establishment of a baseline understanding of costs, which many plan sponsors often lack. This initial understanding is crucial for making informed decisions. Additionally, they stress the active involvement of advisors in the benchmarking process and the importance of negotiation with service providers based on benchmarking results.
Read the Full Transcript Here:
Fred Barstein:
Greetings. This is Fred Barstein, CEO and founder of 401kTV and TPSU, here in Alpharetta, where we just completed a TPSU program with Shelly Horwitz from Pensionmark. Welcome, Shelly.
Shelly Horwitz:
Thank you. Thank you so much.
Fred Barstein:
Okay if we ask you a few questions?
Shelly Horwitz:
Absolutely.
Fred Barstein:
Shelly is an advisor for… been in the industry for over 25 years, 401(k), 403(b), and with Pensionmark, which is a national organization. Offices in D.C. and Washington, on that.
Shelly Horwitz:
Thank you.
Fred Barstein:
Shelly, what we talked about and what we heard and got a lot of questions today is about due diligence and benchmark and RFP. What is it and why is it important?
Shelly Horwitz:
Yeah, RFPs are incredibly important, Fred, so is due diligence in general. One of the things that I think is most important, is plan sponsors will get out of TPSU especially a really good subset of actionable items that someone can do when they leave, specifically on due diligence. One of the biggest components of due diligence is clearly benchmarking a provider, whether that’s your record keeper, whether it’s your advisor. And then also, we all do, benchmarking on your investments. So that’s just a three-prong process.
The most important piece of that benchmarking is actually doing it. One, it’s going to be able to essentially diagnose how much you’re spending today. Most organizations have no idea how much they’re paying their record keeper, how much they’re paying their advisor, and what’s that construct look like, so that you can make an informed decision. You can’t benchmark and compare if you don’t have a starting point. So the most important thing is just to get a starting point, and that’s asking your providers for fee disclosures and information like that so that you can get a handle for that exercise. Advisors should be part of that process. If they aren’t, they’re not holding up to their end of the bargain.
Fred Barstein:
Right. What’s the benefit, other than just even fees of somebody who does a real diligent benchmarking RFP?
Shelly Horwitz:
Yeah. Diligent benchmarking an RFP is going to, one, give you the base, and then you can actually negotiate with your current provider, which is incredibly important. If you don’t ask, they’re not going to just come to you and say, “We’d like to lower our fee.” So you need to be asking.
The other part of it is suitability. People are using different investment options. One of the exercises of that benchmarking is to know how much are you paying your investment advisor, how much you pay the record keeper, and are the investments you’re using the right ones? And then you can then compare it to other options, whether it’s a full-blown RFP process where you’re asking individuals to submit proposals and bids, other organizations, or there’s soft benchmarking that we in the industry can do for you, which is a very easy exercise.
Fred Barstein:
So final question. First TPSU. Why do you think plan sponsors should attend this?
Shelly Horwitz:
Oh my goodness. We heard amazing feedback. The interaction between peers is more invaluable than the stuff that I’m talking about. We’re giving you education and fiduciary training and a lot of checklists of things that you can take back to your office, but I will say the most important thing that we’ve heard, was a resounding, “Thank you for inviting us. Thank you for allowing us to talk to our peers.” That peer-to-peer interaction is invaluable. They’re getting tips, they’re getting tricks of the trade. If someone’s new to their organization, new to HR, new to finance, they’re getting… Some of these individuals have been in the industry 30, 40 years, and they’re able to network with those individuals and get great information in return.
Fred Barstein:
And they don’t believe us at the time, but-
Shelly Horwitz:
That’s right.
Fred Barstein:
… any sales and marketing?
Shelly Horwitz:
None. None whatsoever. I think that’s the beauty of the program, is there is no marketing, no sales, no one is trying to do anything in that respect. It’s truly training, education, awareness, and just that peer-to-peer insight that’s invaluable.
Fred Barstein:
Okay. Well, thanks for your support of TPSU.
Shelly Horwitz:
Yeah, my pleasure. Thank you.
Fred Barstein:
Thank you for watching 401kTV, and please, we hope to see you at a TPSU program in your area. We do 50, 60 programs a year, so I’ll look forward to meeting you.
