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FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed to the public.
Advanced (k)
Benchmarking advisor fees and services
17362.1 6/09
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
2009 MFS Fund Distributors, Inc.
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.
Benching Advisor Fees and Services 2FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed to the public.
Advisor Fees and Services
CONTENTS
I. Retirement Advisor Fee and Service Trends- Database methodology- Fee methods and averages- Retainer versus project-based fees- Investment and fiduciary services
II. Communicating Advisor Fees and Services to Plan Sponsors- Best practices for communicating fees- Annual advisor fee and service review template
III. Fee Benchmarking Tools
FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed to the public.
ADVISOR FEE & SERVICE TRENDS
Copyright © 2009 Ann Schleck & Co. All rights reserved. 4FOR 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
DC assets under advisementBusiness models represented
31%Affiliated
FAs 42%RIAs
27%Fee Only
Consultants
0 to $100M 27%
$101M to $500M 36%
$501M to $1B 15%
Over $1B 22%
Copyright © 2009 Ann Schleck & Co. All rights reserved. 5FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed to the public.
Staffing Norms
TYPICAL RETIREMENT PRACTICE STAFFING LEVELS
Full-Time Retirement Staff
1 to 3 employees 45%
4 to 7 employees 37.5%
8 to 12 employees 12.5%
Over 12 employees 5%
Retirement Staff by Business Model
FT Staff Range Mean
Affiliated FAs 1 to 11 3.9
Independent RIAs 1 to 53 5.8
Fee-only consultants 1 to 65 7.5
Average of 1 full-time retirement specialist for every $169 million in assets under advisement
Copyright © 2009 Ann Schleck & Co. All rights reserved. 6FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed to the public.
Fee Methods
ADVISOR FEE METHODS BY PLAN SIZE
Trends
• Most advisors use a standard fee schedule
• Custom pricing for complex plans• Asset-based for current clients • Flat fee for new clients• Who charges the most?
- Plans under $5M: Fee-based consultants- Plans $25M to $50M: FAs - Plans over $200M: RIAs
Asset-Based Fee Flat Fee Flat Fee +
Asset-Based
Under $10M 82% 13% 5%
$10M 75% 19% 6%
$25M 68% 23% 9%
$50M 66% 23% 10%
$100M 46% 37% 17%
$500M 17% 50% 33%
Percentages may not add up to 100% due to rounding
Copyright © 2009 Ann Schleck & Co. All rights reserved. 7FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed to the public.
Use of Fee Caps
PERCENT OF ADVISORS THAT CAP FEES
Factors Driving Advisor’s Fees
• Plan complexity• Sophistication of the sponsor• Plan committee structure• Plan size• Multiple sites/locations• Frequency of investment reviews• Number of meeting days• Seniority of advisor team
Fee Caps By Plan Size
Percent That Cap Low High
Overall Database 31% $3M $250M
FAs 26% $100M $250M
RIAs 55% $3M $100M
Fee-Based Consultants 19% $20M $250M
Copyright © 2009 Ann Schleck & Co. All rights reserved. 8FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed to the public.
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
Copyright © 2009 Ann Schleck & Co. All rights reserved. 9FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed to the public.
Ongoing Investment Reviews
FREQUENCY OF INVESTMENT REVIEWS BY PLAN SIZE
• 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
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%
Copyright © 2009 Ann Schleck & Co. All rights reserved. 10FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed to the public.
Fee Averages
ANNUAL RETAINER AND CONSULTING FEE RANGES
Consulting Fee Examples
Service Fee Range
Vendor search $3,000 to $40,000
Provider fee & service reviews $3,000 to $10,000
Investment policy $2,000 to $10,000
Employee meetings $500 to $3,000per day
Annual Advisor Retainer Fee Averages*
Plan Size Mean/Average Annual Fee Most Common
$5M $17,590 $12,500
$25M $51,512 $50,000 and $62,500
$50M $79,087 $50,000 and $125,000
* For more information on fees for specific plan sizes, refer to Ann Schleck & Co. Fee AlmanacTM or online Fee BenchmarkerTM
FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed to the public.
Communicating fees to plan sponsors
Benching Advisor Fees and Services 12FOR 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
Benching Advisor Fees and Services 13FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed to the public.
Annual Fee Disclosure
1. Your fee philosophy and approachFor 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
POTENTIAL TOPICS TO INCLUDE IN YOUR ANNUAL FEE DISCLOSURE
FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed to the public.
Fee benchmarking tools
Benching Advisor Fees and Services 15FOR 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
Benching Advisor Fees and Services 16FOR DEALER AND INSTITUTIONAL USE ONLY. Should not be shown, quoted, or distributed to the public.
FOR MORE INFORMATION, PLEASE CONTACT
Name
Phone
17362.1 6/09
Thank you