Case Study #3
Determine if the Plan meets best practices and delivers most opportunities for gain to the participants.
We at ProEast were asked by the client to review investment options, fee structures, service providers in short, the entire Plan. Are there shortcomings, what is being done properly, what is not being done properly. Based on the review, make recommendations for improved services, with a goal of delivering better results to the participants.
Commenced a Fiduciary Service Review. Asked decision makers if an Investment Policy Statement (IPS) was available so measurements regarding IPS compliance c/b taken. Using licensed software, investment options were reviewed. Fees paid to various service providers were reviewed and compared to benchmarks available through licensed software. Where appropriate, requests for quotes were obtained to compare current fees with potential pricing structures. Requested the sponsor to provide notes from investment review meetings. Requested sponsor to provide records from employee educational meetings.
There was no Investment Policy Statement in place. It was determined that not only could more efficient share classes with lower expenses be used, but even some of the options themselves with good share class usage were not outperforming peers in a particular asset class. Analysis of various fees of service providers determined that record keeping fees could be lower, though fees from Third Party Administrators (TPA) were well in line. Advisor met with the sponsor once annually, and once annually with participants in group meetings. Advisor paid from trail commissions generated by the funds offered in the Plan.
Based on the evaluation, there was a new advisor to the Plan. An analysis determined that a “zero revenue” share class was a better option for the Plan, and that the Sponsor would gladly pay the ProEastAdvisor a fee from the Company checkbook; the idea had never been suggested to the Sponsor. This was the opposite of the old situation where the Advisor was compensated via a trail commission; the trail commission having an impact on participant results whereas the fee paid by the Sponsor allows the full investment return to be credited to participant accounts. Further the agreed upon fee was able to increase both Sponsor/Advisor and Advisor/Participant meetings to 2x annually.
Case studies may not be representative of the results of all clients and are not indicative of future performance or success. Tax advice not provided. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Step #1 in our financial planning process is a free 30-minute phone consultation. Quickly schedule your appointment here: