Case Study
All of these pros and cons came to fruition with one sponsor in particular, said Rogers. Rogers Financial was hired as the registered investment adviser (RIA) on the plan after the decision was made to leave a bundled provider for an open architecture one. However, when making the decision to leave the bundled provider, the client had assumed that the proprietary requirement was higher than it actually was, he said. Further, the fee disclosure provided by the open architecture provider assumed “mapping” that was "dubious," Rogers said. Although the fund menu suggested in the proposal was reasonable, the share classes used by the open architecture provider contained above-average fees given the plan demographics.
However, after Rogers recommended a more prudent fund menu to the client, the billable fees came in higher than that of the bundled provider. The recordkeeping fees, which were billed quarterly, were often inconsistent because the revenue sharing from some fund companies lagged. The technology and customer service was not up to par with that of the bundled provider. The plan participants, though adequately diversified, did not appreciate the differences between funds, but did notice when their employer began to pass fees off to them, which they had not seen under the previous provider.
Rogers said that after having gone through that process, the client is now considering proposals from other bundled providers.
Nicole Bliman