From a small family-owned business to a multinational corporation, every client — and plan — deserves the highest level of service. But the specific offering appropriate for each plan can depend largely on its size, and the fees for investments and services can range widely. By leveraging the power of negotiation, advisory know-how and frequent benchmarking, you can help keep fees reasonable for clients no matter how large or small their plan. Here’s a breakdown of how fees can differ between plans based on size.
Smaller Plans Often Pay More
A baseline cost for investment, recordkeeping, administrative and advisory fees is necessary to maintain the quality and integrity of a plan’s services. But because of lower plan assets — less than $10 million — fees for small plans usually are proportionately higher than those for larger plans. Typically, plans of this size carry annual administration fees between 1.5% and 2% of plan assets.
Mid-sized Plans: Higher Efficiency Means Lower Fees
Many advisory services and recordkeeping fees aren’t linear, meaning that the cost of administering a plan doesn’t increase proportionally with each dollar — or participant — in the plan. Increased operational efficiency means that fees don’t scale commensurate with plan growth. Consequently, many providers are willing to set fees between 1% and 1.5% for mid-sized plans, where assets can range from $10 million to $100 million.
There’s Strength in Numbers With Larger Plans
Larger plans often benefit from the most competitive fee structures due to factors such as economy of scale and streamlined operational costs. For a plan with more than $100 million in assets under management, most providers will be willing to negotiate fees — the large asset base means these plans generate significant revenue for providers, even if the fees are relatively low. As a result, many plans at this level can have fees below 1%.
Rightsize Fees With PlanFees
Making sure fees are reasonable is a primary fiduciary responsibility for retirement plan advisors. Yet the Department of Labor provides no specific guidance about what “reasonable” really means. Benchmarking fees with comparable plans is one of the best things advisors can do to help ensure reasonable fees and safeguard the interests of plan participants and sponsors. PlanFees’ suite of innovative tools has revolutionized the benchmarking process:
- Prism Total Fees Benchmarking allows you to get a quick checkup on investment, recordkeeping, administration and advisory fees in under two minutes.
- Prism365 helps you quickly monitor and benchmark 15 essential advisory services, as well as service frequency, with just a few clicks.
- RFP Express gives you access to custom quotes from top providers within 24 hours.
Whether you service small plans, mega plans or anything in between, PlanFees has benchmarking solutions to help ensure fees are reasonable while providing top-tier service to plan sponsors — and elevating your advisory practice.
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