There’s little doubt that the fee disclosure rules introduced by the Department of Labor have had a significant impact on the retirement plan market. Many plan sponsors have seen their fees and expenses go down, both for investment products and administrative services. They’ve also seen confusing and often expensive pricing structures replaced by more transparent, lower-cost, fee-based arrangements. Yet some sponsors still find it challenging to determine the true cost of their retirement programs, especially in cases in which fees are bundled into insurance wrappers or embedded along with other costs in mutual fund expense ratios.
“The fee disclosure rules have accomplished much of what the Department of Labor intended,” says David Musto, president of Ascensus, a plan provider that has been recognized for delivering exceptional value for cost.1 “Still, we’re finding even today that our adviser partners often ask our sales and service teams to help them better explain and compare plan administration and recordkeeping fees to plan sponsors.”
To help advisers clearly illustrate the value of their clients’ plans, Ascensus routinely benchmarks its fees and disclosure practices against those of its peers. The firm has also developed tools and services to help advisers do the same for themselves, and to educate their plan sponsor clients about getting the most for their money.
“It’s become a very competitive environment in terms of who can provide the best value for what they’re charging—whether you’re talking about an adviser or a service provider like Ascensus,” Musto says. “As an organization, we pride ourselves on our ability to help clients simply interpret the value that their retirement plan delivers.”
Ascensus developed a web-based tool—available at alwayshaveaplan.com—that allows advisers to quickly run a custom pricing comparison for their clients’ plans based on factors such as plan assets and participant count and how the plan pays its recordkeeping fees. The tool can demonstrate how a flat-dollar, participant-based approach to recordkeeping fees can reduce costs and boost a plan’s market value over time—a message plan sponsors appear to be taking to heart.
In 2004, Ascensus became the first independent recordkeeper to introduce a scalable, fee-based retirement platform for advisers and their clients. In 2017, fee-based plans represented 90% of new sales on the Ascensus platform.
Meanwhile, Ascensus assists advisers in determining whether their own fees are competitive by updating them annually on trends in adviser fees, drawing on data from the more than 25,000 fee-based plans that the company administers.
To further help advisers and their clients, Ascensus gives advisers the flexibility to establish upfront, tiered fee schedules, with adviser fees that go down as plan assets hit certain pre-established break points. Initially popular in the larger-plan market, Musto says this approach is now migrating down-market, too.
Ascensus also suggests taking advantage of the growing availability of low-cost institutional shares from fund companies, including zero-revenue fund options. Currently, Ascensus offers more than 5,500 zero-revenue fund options and more than 6,000 additional low-cost investment options, both of which are already winning favor with many plans.
What else can advisers and plan sponsors do to maximize the value of their retirement savings plans? Musto suggests thinking about tax implications when deciding on how they pay plan fees.
“Many small business owners have recently completed their tax filings for 2017, and maximizing tax advantages for next year is top of mind,” he explains. “It’s important to note that sponsors who write a check for recordkeeping services under a fee-based structure receive the benefit of a business tax deduction for that expense. Clearly, that’s not the case when fees are wrapped into an asset-based charge.”
To run a custom pricing comparison for your clients, visit alwayshaveaplan.com.
1 2017 PLANADVISER Retirement Plan Adviser Survey, “Top-Rated Defined Contribution (DC) Providers.”