Products January 30, 2014

TD Ameritrade Unveils Plan Solution

A new program from TD Ameritrade offers registered investment advisers (RIAs) a turnkey solution for simplified development and management of qualified defined contribution retirement plans.
Reported by

The streamlined program makes it easier for RIAs to bundle essential plan services while preserving an open-architecture arrangement for investment flexibility, the firm says in a statement. The new solution is also designed to reduce the time it takes to ensure compliance with applicable regulations.  

The RIA program is run in conjunction with TD Ameritrade Institutional and provides advisers with support during the launch and ongoing administration of retirement plans. The service can also help advisers turn new and existing clients into growth opportunities, the firm says.

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

The solution offers RIAs a single point of contact for all their 401(k) plan-servicing needs, combining recordkeeping, asset custody and third-party administration from TD Ameritrade Trust Company. Participants in the plans gain access to thousands of non-proprietary ETFs and mutual funds.  

“We listened to advisers and they wanted a simplified, branded retirement plan solution to help them gather assets they’re not capturing today,” says Skip Schweiss, managing director, TD Ameritrade Institutional and president of TD Ameritrade Trust Company. “Our new approach gives advisers a streamlined solution with the TD Ameritrade name, which can be a key selling point with plan sponsors.”

TD Ameritrade says just 5% of RIAs service a meaningful number of 401(k) plans, but recent regulatory changes designed to enhance investor protections have tilted the playing field in the favor of RIAs.

The U.S. Labor Department now requires retirement plan providers to fully disclose their services, compensation and fiduciary status. TD Ameritrade says that more employers, as they gain better access to fee and service disclosures, will shift retirement plans to RIAs, where advisers are held to a rigorous fiduciary standard of care.

“Regulators have changed the ground rules in a way that I believe truly favors fiduciary advisers,” Schweiss says. “Opportunity is knocking and we want to help advisers open that door.”

RIAs will get the TD Ameritrade Retirement Plan Playbook, which offers step-by-step guidance on how to set up a retirement plan business, approach prospects and service clients. The program offers account management tools and materials for advisers, enrollment and education support for employers, as well as planning tools and IRA rollover assistance for plan participants.

Advisers still control their clients’ investment options through TD Ameritrade Trust Company’s open-architecture platform, with unbundled access to more than 13,000 mutual funds and over 1,000 ETFs, as well as access to TD Ameritrade’s self-directed brokerage platform.

More information is available here.

Data & Research January 30, 2014

Do Sponsors Know Plan Fees?

In this new age of fee disclosure, it may be surprising to some that more than one-quarter (26.6%) of respondents to PLANSPONSOR’s 2013 Defined Contribution (DC) Survey do not know the approximate average expense ratio of all investment options in their plans.
Reported by

Not quite as surprising is the fact most of the respondents who do not know are among the smaller plan sizes group. On average, 38% of respondents with plan sizes less than $25 million do not know the average expense ratio of all plan investment options. This compares to 13% of respondents with plan sizes greater than $50 million.

The survey also found, for the 2012 plan year, only 55% of respondents calculated the total fees (all sources) paid to their DC providers/recordkeepers. Among those who calculated fees, 68.7% benchmarked their fees against similar plans. It is important to note that 2012 was the first year fee disclosures were formally required by the U.S. Department of Labor, but Brian O’Keefe, director of Research and Surveys at Asset International, publisher of both PLANADVISER and PLANSPONSOR, finds these results surprising.

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

“In today’s world, consumers have become very adept at price comparison shopping for products and services, so I somewhat expected sponsors would exhibiting similar behavior related to the services they are paying for from administrative providers,” he says.

O’Keefe notes another concern might be the objectivity of the comparisons that are being used as a combined 70% of those who calculated fees and benchmarked their fees against similar plans used either their current recordkeeper (27.1%) or their current adviser (43.0%) to benchmark their administrative costs. “Although recordkeepers and advisers may have access to data from other clients, that data may have a selection bias in that it shares a connection to the recordkeeper/adviser, so sponsors should make sure they understand the source of the comparative data,” he adds. “Contracting an independent company with no affiliation to the plan provides the highest level of comparison certainty, but only about one in ten (11%) of respondents to the survey pursued this strategy.”

According to PLANSPONSOR’s "2014 Plan Benchmarking Report," overall, 26% of DC Survey respondents indicated the average expense ratio of all investment options in their plans is 50 basis points (bps) or less. Thirty-seven percent report their average expense ratio is greater than 50 bps to 100 bps. More than 10% said their average is greater than 100 bps. As expected, a greater percentage of smaller plans than larger plans have higher fees; 15% of plans of sizes $50 million or greater indicated their average expense ratio is greater than 100 bps, compared to 64% of plans of sizes less than $50 million.

Overall, two-thirds of respondents indicated they formally review actual administrative costs/fees annually. More than 10% said they do so every one to two years, and 9.9% do so every two to three years. Four in ten (41.5%) of DC sponsors, overall, reported their organization pays for plan administrative/recordkeeping costs not covered by investment revenue. Twenty percent said participants pay via fixed costs billed to their accounts, and 17.8% say participants and their organizations share the costs. Nearly 13% said all plan fees are paid via revenue sharing.

Four in 10 DC Survey respondents indicated their advisers are paid a percent of plan assets, 21.7% said advisers are paid a monthly/annual retainer, and 4.3% reported advisers are paid a per participant fee. One-quarter of DC plan sponsors do not know their advisers’ fee arrangements.

The "2014 Plan Benchmarking Report" features proprietary data collected in late 2013 by PLANSPONSOR in its annual Defined Contribution (DC) Survey. The report highlights various plan design features and outcomes of more than 5,300 U.S. DC plans. Information about how to purchase the report is here.

«