Why Value-Add Retirement Services Trump Pressure to Slash Fees
Providing specialist value-add retirement services trumps the pressure to lower fees, according to Steve Bogner, a New York-based advisor at Treasury Partners.
“Almost every area of financial services is under fee compression – and the retirement plan space is no different,” says Bogner, who is among this year’s Financial Times Top 401 Retirement Advisors.
But retirement plan advisors have been able to avoid cutting their fees if they can demonstrate they deliver better value for the money, according to Bogner.
“We deserve to be paid for what we do behind the scenes and on the ground,” he says.
Treasury Partners typically uses benchmarking services to assess its fee levels compared with other retirement plan specialists, “and we try to come in at the center,” Bogner says.
Bogner notes that “certain large competitors” can come in and vie for the same retirement plan business “and slice their fees in half because their economies of scale may be different, and they can do that.”
“That just happened to us, but we still won a $100 million plan standing firm on our pricing,” Bogner says, without elaborating on the new client. “Cost is never the sole driver of winning a new client.”
In that case, Treasury Partners won over the new client because of its risk mitigation strategy for the retirement plan sponsor, according to Bogner.
“The race to the bottom [in terms of fees] has already occurred, unless the advisor has been completely asleep at the wheel,” he says. “The key distinction now if you are going to be one of the elite advisors in this space is to be able to lower overall plan risk.”
A retirement plan specialist advisor’s ability to mitigate risks for the plan sponsor is a bigger driver in their selection and retention by plan sponsors than fees, according to Bogner.
Bogner, who is also an adjunct lecturer at The Plan Sponsor University, which offers training for retirement plan fiduciaries, says the plan sponsors’ needs vary depending on the business goals of the company, the size of the workforce, the amount of plan participant assets and the financial wellness priorities of the plan participants.
In one of the latest retirement plan accounts Bogner signed on as a client, he helped the plan sponsor with even the basics, including creating an investment policy, a financial education policy and a fiduciary audit file to document processes and procedures.
“We have boilerplate investment policies and education policies. We sit down with the client to customize the policies for them,” he says.
For that new client, Bogner says he also facilitated the more complex demands of improving the plan sponsor’s technology and delivery platform, organizing a new fund lineup for plan participants and enhancing the financial literacy of the plan participants.
Support for compliance with fiduciary duties is another specialist service retirement plan sponsors are looking for, says Bogner.
“When the DOL comes in to check your compliance, they want to see that you have processes in place and that you had meetings, and you were taking notes in the meetings, and there was a committee responsible for overseeing all that,” he says.
“And that’s really what’s critical should the DOL audit you or should a participant start a lawsuit against you. We can never bulletproof a plan but we can get a plan to the point that you could shut down a lot of problems along the way,” he adds.
Bogner says he can fit the compliance education of his clients into his lectures at The Plan Sponsor University.
“We are able to invite our own clients and our own prospects to our TPSU lectures and events,” he says. “They will get a three-fourths day session and an online study afterward where they can receive a 401(k) professional designation called the C(k)P.
TPSU lectures are designed for plan sponsor committee level members, such as HR heads, CFOs or general counsels.
In addition to the TPSU lecture, Treasury Partners meets with their plan sponsor clients’ committee either once or twice a year to review their fiduciary duty, their responsibilities and the risks involved as part of being members of the committee.
Separately, Treasury Partners goes through specifics with its plan sponsor clients, depending on their needs. These include discussions on financial wellness programs, debt or student loan programs, retirement tools on plan sponsors’ websites, and health care costs.