Illustration by Jody Hewgill
Top retirement plan advisers have been benchmarking
plans for years, with the available tools evolving as more and more
specialists get into the game and as the focus on participant retirement
outcomes increases. Benchmarking tools can offer a holistic checkup
of the plan, against its goals and against its peers. Now with the 408(b)(2)
“fee reasonableness” deadline looming, advisers have additional
tools to determine and document plan fees as part of a plan sponsor’s
fiduciary responsibility.
Whether for prospects or existing clients, the added
expertise of the adviser to interpret a benchmarking report and recommend
plan changes helps to highlight his value. “Smart advisers are using
it as a marketing tool to distinguish themselves from the pack,”
says Bob Francis, former chief operating officer at National Retirement
Partners and founder of Gale Force Consulting. “They explain how benchmarking
works, how the data is segmented and how it uniquely applies to what
the client’s plan is trying to achieve.”
“Benchmarking is an important part of the fiduciary
process,” says Jamie Worrell, managing director of 401(k) Advisors
in Providence, Rhode Island. “There are a variety of good tools out
there; there’s not a ‘one-size-fits-all’ option. Every case is
different, so it’s important to know what the tools are, [in which
situations] they best fit and how to use them accordingly.”
Cost is also a factor when selecting benchmarking
tools, yet, as with plan fees, it is relative, based on the value of
the benchmarking report to the plan. In many cases, defined contribution
investment only (DCIO) providers, other providers or recordkeepers offer
proprietary tools or access to third-party benchmarking tools as a value-add
for advisers.