Have you ever taken your car in for an oil change only to have the mechanic give you a list of items wrong with your car? Unless you have a deep knowledge of the inner workings of your car, it can be hard to discern what REALLY needs attention now.
What if, instead, you paid your mechanic to ensure your car ran as smoothly as possible, inform you when it needed a new carburetor or tires, and find the best products at the best price for you. Importantly, they would not be paid by these products.
Although we’re not aware of this type of business model in the auto industry, this is how we operate at P&A. Unfortunately, not all financial/investment advisors operate the way we do. As a result, the Department of Labor recently addressed the high fees and conflicts of interest common to the 401(k) world by increasing the oversight responsibilities for employers, business owners, and plan trustees. This new ruling has created a tidal wave of changes and has forced some 401(k) plan providers out of the business because they don’t want their representatives held to a fiduciary standard.
With that said, there are 401(k) plan providers that offer a good combination of service and value. If your provider delivers satisfactory performance and service, while easing your fiduciary burden, we’d suggest stick with them. But if you suspect any of these are not the case, we have a 401(k) offering that is very compelling and may be of interest to you.
Since 1995, P&A has developed a deep level of expertise in two areas: managing investment portfolios and financial planning. We strive to stay laser-focused on those areas working with clients who have investable assets of $100k+. Many of our clients own companies and desire a similar experience for participants within their company 401(k) plans. To address this, we have partnered with The Standard, a well-respected third-party administrator and retirement plan provider with over 80 years of experience. Our other partner is Charles Schwab, custodian and the holder of plan assets. By separating the roles of advisor, administrator, and custodian, our offering results in a fully transparent relationship in which all fees are clearly understood our client’s best interests are being served.
We’ve found our retirement plan offering is ideal for plans with $2 million to $25 million in assets, although these aren’t hard numbers. Here are the primary benefits to utilizing P&A and our partners for your company retirement plan needs:
- Collaboration with company owners – We’ll make sure your plan offers the right mix of benefits to employees while fully addressing the goals of company owners. From assisting you in determining an appropriate match to adding profit sharing options or a cash balance plan, we can help.
- Transparency of fees – Standard Retirement Services’ pricing is very competitive, given the service/value they provide. All plan fees will be transparent and listed on one page.
- Reduced administrative burden – Standard greatly simplifies annual reporting and disclosure requirements, handles compliance testing, and monitors participant eligibility. They can manage the distribution of notices and enrollment materials as well as assume ERISA 3(16) Delegated Administrative Fiduciary Services to support the plan’s administrative responsibilities.
- Greater fiduciary protection –Both P&A and Standard are held to the fiduciary standard.
- Cost savings – Many mutual fund companies pay 401(k) plan providers to utilize their funds in a plan, an arrangement known as revenue sharing. This increases your plan costs and creates conflicts of interest, which is why Standard returns all revenue sharing to the plan, reducing your costs and eliminating this conflict of interest.
- Self-directed account capability – This option allows plan participants to utilize investments outside of the core fund lineup or to hire a professional investment advisor like P&A to manage their 401(k) account for them.
- Enhanced education for employee participants – Standard meets with employees on a regular basis, either in a group or individually, to make sure they understand the components of the plan and the impact of saving in their 401(k).
As mentioned earlier, you may have a long-standing and trustworthy relationship with your current 401(k) plan provider. Even so, you have a fiduciary responsibility to do your due diligence relating to the plan investment options and plan fees. When the time comes to fulfill on that due diligence, please consider engaging us to provide you with a simple cost-benefit comparison and proposal:
- Your plan’s current fund lineup/fund options
- How the total assets in your plan are divvied up between these investments
- 408(b)(2) fee disclosure notice for your plan
- Plan adoption agreement or summary plan description (SPD)
In the end, whether you go with our offering or use it to validate your current provider, we have added value, and that’s always our goal. If this is of interest, please call P&A and ask for Trey, Jon, or Blake.