We all know someone who likes to take the easy way out. This would describe the narrow view of fee-only benchmarking. It is fast and easy. However, like all things with those characteristics, it adds little value and may do more harm than good.
Whereas, we all know someone who does things the right way. Their methods usually take a little longer and are a little more difficult but, like all things with those characteristics, they add a lot of value. They do not act with haste. They see the bigger picture that ensures that quality, service, value and extra credit items are appropriately accounted for. These characteristics would describe the thorough consumers of Value and Fee benchmarking.
If all of the above is true, why would anyone view fee-only benchmarking as an acceptable solution?
Two answers, our desire for instant gratification and “we don’t know what we don’t know.”
First, I think deep down we all know that fiduciary obligations are probably not the place to look for instant gratification – you should be spending whatever time and effort is required to get to the right answers.
Second, if your clients think that fee-only benchmarking is satisfactory you should tell them “what they don’t know” and that is that unless quality, service, value and extra credit are considered they aren’t doing their job as fiduciaries and frankly, you aren’t doing your job as their trusted advisor.
Now that we all have better context to evaluate why a comprehensive Value and Fee benchmarking strategy is the way to go, why not ask some probing questions of your client or prospect to take benchmarking to the next level?
Benchmarking Delivery Probing Questions
- What is the goal of your company’s retirement plan?
- Do you believe the current plan is working towards that goal?
- Are there any areas of frustration with your retirement plan?
- Are you considering adding a financial wellness program to your plan?
- Do you feel your employees are getting enough education?
- Would you like to offer your employees (rank and file, highly compensated) more ways to save for retirement?
- If you could change one thing about your current plan, what would it be and why?
The first step in being a trusted partner is asking questions. Listen as your clients and prospects share extremely valuable insights. By asking the questions above you are learning their pain points, how to speak their language and how to keep them happy.
Once answered, take the next step to seek out the help from recordkeepers, TPAs, payroll providers, financial wellness companies, and/or other professionals. Find the right partners that will solve your client’s needs.
Especially since the goal of a company sponsored retirement plan is to help employees save for retirement, a benchmarking conversation should not only address fee reasonableness, but rather obligations as a fiduciary and ways to improve the plan and participants outcomes.
To begin a thorough conversation, contact us for more information about FBi’s Value and Fee Benchmark with FEEPOINT® report and/or our plan design scenario tool, Retirement Outcomes Evaluator. Fiduciary Benchmarks has comprehensive tools, resources, and reports to help advisors expand beyond benchmarking and to demonstrate trusted value.
FBi Tools that Can Help
Value and Fee Benchmarking Report, a peer-to-peer evaluation report that shows a comparison of the existing plan to other similar plans and can provide guidance on how changing certain plan features could help the employer offer a more competitive retirement plan benefit.
Our report follows a 5-step process that is fair and repeatable.
Customize the Benchmark Group. We use numerous factors to build a benchmark group from our proprietary database that is customized for each peer group using mathematical models designed to optimize the degree of accuracy.
Review Service Provider Quality. The DOL has noted in prior rulings that it is allowable to consider the Quality of the Service Provider when determining Fee Reasonableness. We provide a logical framework to analyze this issue.
Assess Scope of Services. We examine the scope of services being provided so plan sponsors can understand how the services they are receiving are impacting the cost structures of the service providers.
Examine Value Delivered. We examine the Value Delivered in terms of helping plan sponsors do their job as a Responsible Plan Fiduciary and to participants in terms of helping them save for retirement.
Evaluate Fees. Finally, we track and compare fees to the Benchmark Group and to FEEPOINT®. FEEPOINT is a proprietary fee calculation designed to account for fiduciary status, extra services and extra meetings that are not found in the typical plan.
Download a sample Value and Fee Benchmarking report by visiting https://www.fiduciarybenchmarks.com/resource-center/
Craig Rosenthal Senior Vice President, Advisor Sales & Service
Craig is responsible for sales, service, product development and partnerships with the Advisor/Consultant, Broker/Dealer, and DCIO channels.