What You Don’t Know Can Cost You A Lot Of Money

# 1 - Advisor compensation. 

Many plans, especially ones written by payroll companies or plans that have been with the same provider for over 20 years have included a fee for advisor services that the company keeps as extra profit. An institution merely sending emails to your employees is not an advisor. An advisor is someone who provides Fiduciary Services on your behalf; oversees the investment lineup, recommends changes to the lineup as needed when fund performance falters and maintains records of meetings and all documents. Advisors also educate employees and offer meetings to discuss any question they have about the investments and whether the employee is contributing enough to be on track for retirement. Another hidden fact is that many advisors do not reduce their compensation as the plan assets grow but the workload does not. 

Example:  a recent plan that I reviewed with a payroll provider had an average fund expense at least $500 per $100,000 more than expected. Besides just being too expensive, the plan had been assigned to a “house account”. When the plan was $1.0 million that was only $5000 but now that it is $8.0 million the total over-charge is nearly $40,000!

The Department of Labor requires cost disclosures be prepared to give companies and participants the information they need. Unfortunately, the information is not easily understood and most often, not reviewed at all. 

The answer: It is always a good idea to have your plan reviewed. However, asking your current advisor to review your plan is like asking the local fox to babysit your hen house. It is best to get an independent review of your plan provider, your investment lineup, your plan expenses including advisor compensation and your Third Party Administration. Remember, the law of compounding, saving even a small amount over a long period can mean a lot more money for you and your employees.