Does Your Provider Measure Up? Part Two: Costs to Offer Retirement Plans
Who enjoys paying ‘sticker’ price for a new car? I have yet to meet someone who does. The reason no one pays sticker is because everyone knows you can negotiate the price down a couple hundred, if not a thousand, dollars.
But what most people don’t fully understand is the dealership makes most of their money upselling you on the bumper-to-bumper warranty and additional services, like tinting the windows. These back-end costs quickly erode any savings you earned during your sticker negotiations.
Some investment products and Plan Providers are the exact same. Some companies will provide the administration for free, yet they slam you on your investment products expenses. The opposite applies to high service fees and free investments.
Below are three important questions to consider before selecting a retirement plan:
1) How is the Plan Provider compensated?
2) Does your provider, its employees, and/or any affiliated entity derive any economic benefit from investment products, intermediaries, or other service providers utilized with regard to the Plan?
3) Are all the fees and expenses related to the Plan easy to find and understand?
The key take away here is to identify any and all, fees, expenses, and costs related to the providers (TPA, Record-keeper, Investment Manager and Custodian) required to maintain your retirement plan. This will uncover the true cost of your retirement plan, which can be painful if you were unaware of the hidden, or back-end, fees your plan provider/investment manager has been silently pocketing.
Rather than do business with an organization that has hidden, or back-end fees, work with a company that transparently shows all costs associated with your plan. It is much harder than you would think to find such a company, or car dealership for that matter.
Next week- Part Three Additional Services