Benchmarking Advisor Fees & Services

Report
Advanced (k)
Benchmarking advisor fees
and services
NOT FDIC INSURED  MAY LOSE VALUE  NO BANK GUARANTEE
2009 MFS Fund Distributors, Inc.
FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed
to the public.
Ann Schleck and Co. is not
affiliated with MFS. The
information presented herein was
provided by Ann Schleck and Co.,
and MFS cannot guarantee its
accuracy and/or completeness.
17362.1 6/09
Advisor Fees and Services
CONTENTS
I.
II.
III.
Retirement Advisor Fee and Service Trends

Database methodology

Fee methods and averages

Retainer versus project-based fees

Investment and fiduciary services
Communicating Advisor Fees and Services to Plan Sponsors

Best practices for communicating fees

Annual advisor fee and service review template
Fee Benchmarking Tools
FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed to the public.
Benching Advisor Fees and Services
2
ADVISOR FEE & SERVICE TRENDS
FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed to the public.
Advisor Fee Trends
FEE BENCHMARKERTM
Database Composition
120 practices, 727 retirement specialists, 5000+ defined contribution (DC) plans
Business models represented
31%
Affiliated
FAs
42%
RIAs
DC assets under advisement
0 to $100M
27%
$101M to $500M
36%
$501M to $1B
15%
Over $1B
22%
27%
Fee Only
Consultants
FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed to the public.
Copyright © 2009 Ann Schleck & Co. All rights reserved.
4
Staffing Norms
TYPICAL RETIREMENT PRACTICE STAFFING LEVELS
Full-Time Retirement Staff
Retirement Staff by Business Model
FT Staff Range
Mean
Affiliated FAs
1 to 11
3.9
1 to 3 employees
45%
4 to 7 employees
37.5%
Independent RIAs
1 to 53
5.8
8 to 12 employees
12.5%
Fee-only consultants
1 to 65
7.5
Over 12 employees
5%
Average of 1 full-time retirement specialist for every $169 million in assets under
advisement
FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed to the public.
Copyright © 2009 Ann Schleck & Co. All rights reserved.
5
Fee Methods
ADVISOR FEE METHODS BY PLAN SIZE
Trends
Asset-Based
Fee
Flat Fee
Flat Fee +
Asset-Based
Under $10M
82%
13%
5%
• Custom pricing for complex plans
$10M
75%
19%
6%
• Asset-based for current clients
$25M
68%
23%
9%
• Flat fee for new clients
$50M
66%
23%
10%
• Who charges the most?
$100M
46%
37%
17%
17%
50%
33%
• Most advisors use a standard fee
schedule
Plans under $5M: Fee-based consultants $500M
Plans $25M to $50M: FAs
Plans over $200M: RIAs
Percentages may not add up to 100% due to rounding
FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed to the public.
Copyright © 2009 Ann Schleck & Co. All rights reserved.
6
Use of Fee Caps
PERCENT OF ADVISORS THAT CAP FEES
Factors Driving Advisor’s Fees
Fee Caps By Plan Size
• Plan complexity
Percent
That Cap
Low
High
Overall Database
31%
$3M
$250M
• Plan size
FAs
26%
$100M
$250M
• Multiple sites/locations
RIAs
55%
$3M
$100M
• Frequency of investment reviews
Fee-Based Consultants
19%
$20M
$250M
• Sophistication of the sponsor
• Plan committee structure
• Number of meeting days
• Seniority of advisor team
FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed to the public.
Copyright © 2009 Ann Schleck & Co. All rights reserved.
7
Scope of Services
SERVICES COMMONLY INCLUDED IN THE ANNUAL RETAINER
• Investment policy development
• Investment fiduciary to the plan
• Fund menu design
• Investment monitoring and committee meetings
• Fund replacements and fund manager searches
• Plan design consulting
• Provider fee and service reviews
• Provider management and oversight
• Education program strategy
SERVICES NOT COMMONLY INCLUDED IN THE ANNUAL RETAINER
• Acting as fiduciary to participants
• Asset allocation modeling
• Compliance reviews
FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed to the public.
Copyright © 2009 Ann Schleck & Co. All rights reserved.
8
Ongoing Investment Reviews
FREQUENCY OF INVESTMENT REVIEWS BY PLAN SIZE
Plan Size
Annually
Semiannually
Quarterly
$5M
18%
26%
55%
$25M
10%
10%
80%
$50M
8%
8%
84%
$200M
0%
0%
100%
$500M
0%
0%
100%
• Vast majority conduct investment reviews quarterly
Investment Fiduciary
• 75% are willing to be an investment fiduciary to the plan
• Of this 75%, 60% include plan-level fiduciary support as part of retainer
• When fiduciary support is charged for separately, common fees are:
 5 bps
 $3,500 per year to $15,000 per year
FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed to the public.
Copyright © 2009 Ann Schleck & Co. All rights reserved.
9
Fee Averages
ANNUAL RETAINER AND CONSULTING FEE RANGES
Annual Advisor Retainer Fee Averages*
Plan Size
$5M
Mean/Average
Annual Fee
$17,590
Most Common
$12,500
Consulting Fee Examples
Service
Fee Range
Vendor search
$3,000 to $40,000
$3,000 to $10,000
$2,000 to $10,000
$25M
$51,512
$50,000 and $62,500
Provider fee & service
reviews
$50M
$79,087
$50,000 and $125,000
Investment policy
* For more information on fees for specific plan sizes, refer to
Ann Schleck & Co. Fee AlmanacTM or online Fee BenchmarkerTM
Employee meetings
FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed to the public.
$500 to $3,000
per day
Copyright © 2009 Ann Schleck & Co. All rights reserved.
10
Communicating fees
to plan sponsors
FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed to the public.
Communicating Fees to Plan Sponsors
RECOMMENDATIONS
• Develop a fee philosophy and overall communication approach
• Benchmark your fees and services to industry norms and share the
results with plan sponsors
• Proactively disclose your fees on a quarterly invoice, even if no
explicit fees are charged
• Conduct a year-end fee and service disclosure summary
• Document your client’s ROI as part of your annual fee disclosure
• Broaden your fee discussion to include plan-level cost savings ideas
FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed to the public.
Benching Advisor Fees and Services 12
Annual Fee Disclosure
POTENTIAL TOPICS TO INCLUDE IN YOUR ANNUAL FEE DISCLOSURE
1. Your fee philosophy and approach
For example…
• “We disclose our fees on a proactive and transparent
basis”
• “Our goal is to be competitive, but we are not the low-cost
provider”
2. Annual goals and results achieved for the plan
3. Fee education
• Types of fees in qualified plans
• Key terms and definitions
4. Factors driving fees
5. Cost savings ideas
6. Sponsor’s fiduciary role with fee management
7. Itemization of your fees
8. How fees are charged and paid
FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed to the public.
Benching Advisor Fees and Services 13
Fee benchmarking tools
FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed to the public.
Fee Benchmarking Tools
FEE BENCHMARKERTM
LETS ADVISORS COMPARE FEES &
SERVICES FOR A SPECIFIC PLAN TO
INDUSTRY NORMS
Fee BenchmarkerTM Report…
• Compares fees with similar practices
• Quartile rankings
• Scope of service comparisons
• Commission and fee-for-service
illustrations
To request a report, contact your
MFS sales representative
FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed to the public.
Benching Advisor Fees and Services 15
Thank you
FOR MORE INFORMATION, PLEASE CONTACT
Name
Phone
E-mail
17362.1 6/09
FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed to the public.
Benching Advisor Fees and Services 16

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