Who prepares investment materials for statement paks?

[Guest FREE401k]

This is a somewhat trivial subject but has been bothering me. We are a 401(k) recordkeeper and work in an unbundled environment. We send out quarterly 401(k) statements for our clients. The Plan sponsor of one of our big Plans would like the statement package to include a one-page summary of the performance of the funds available in the Plan, and we agree.

Their Plan offers funds from several fund families, and there is a Registered Investment Advisor that oversees the funds available, makes recommendations to the retirement committe, etc. Each quarter the RIA sends the Plan sponsor an inch-thick report of fund performance. The Plan sponsor asked them for a one-page summary to include in the quarterly statements, and the RIA told them that we as recordkeeper should cull through their quarterly report and put together the one-page summary.

I don't think we have the expertise to do this. We are not money managers or financial experts. We think the RIA should prepare this information, but they have somehow convinced the Plan sponsor that we should do it. This has become a small bone of contention that I'd like to resolve. However, I want to make sure we're on firm ground here so I thought I'd "poll the audience" to find out what others out there are doing or think about this subject. Are we off base here?

Thanks!

[BFree]

Can you get with the client and cull through the report one time to find exactly which measurements or return info the client desires on the one page sheet? Then, each quarter, take the report and regurgitate the information back to them. Note on the statements that the information was provided by the RIA.

I don't see it as an area of expertise question, but as one of 'who does the tedious work?' Why, you do, if you get paid.

[Archimage]

My response would be: "I would be happy to do this for you but it is a tedious process and I will charge $125 an hour with a minimum of two hours billing."

[Guest benji]

Newkirk can provide quarterly fund performance data. We can tie fund performance in with a quarterly newsletter. Please review our information on the Newkirk Fund Link (NFL):

http://www.newkirk.com/nfl.htm

Please feel free to contact us at (518) 862-3200!

[Guest Libby]

I think it would be a mistake for you to do it because 1. you're not competent to do it; 2. it would open you up to liability if you made a mistake; 3. it will take a long time and will delay the process - you'll be blamed; and 4. to do it right will be extremely expensive. If they want this, they should get their registered investment advisor to do it - it sounds like he wants to pass the buck for the reasons above, but he's the one who should be on the hook for any investment related information.

[Guest FREE401k]

Libby: I totally agree with your comments and these are the exact arguments we made to this client, but the client swears this should be our job. I can't believe that deep in their hearts they really think that, they are probably just yanking our chain to get us to do this since the RIA refuses. But they act put out because we won't do it (and they're sure not going to pay us extra to do it). I'd like to smooth over this point of contention so I'm looking for something concrete to back up our claim. I'd like to be able to say something like "I've checked with other recordkeeping across the country and the consensus is that this is a service provided by most money managers." That's why I did this post, I'd like to hear what others do in their firm. Thanks to everybody.

[Larry M]

The question is not whether other administrators provide the service; nor is it what reasons administrators provide for doing or not doing a particular service.

It seems as if the real problem revolves around money. The client does not want to pay for this additional service and you do not want to do it without payment.

It appears as if you need to remind the client the fee you are being paid is for certain, discrete, delineated administrative functions. If he wishes you to add to these functions, you will be delighted to do so if, and only if, (1) you are qualified to do so, and (2) you are paid for the additional work.

If the client refuses to pay for the additional services, your decision becomes a choice between whether you wish to discount your services (to include the extra work involved for no additional cost), or telling the client to go elsewhere.

[Guest Libby]

free401k - Are you a registered investment adviser? Do you have securities licencses to sell mutual funds? If not, I dont think you can provide investment information of this sort. Libby

[Guest Libby]

One more suggestion - if you are licensed, you could tell the client that you will do it but only if you are paid from the assets for it - that this is customarily a job for the investment people, that you will do it for the ria, but you need to be compensated for it - that the registered investment adviser should pay you some portion of its fees to do it - you set the fees.

[BFree]

Libby,

Please let me know why a someone who is not licensed cannot regurgitate historical investment rates of return.

[Guest Libby]

BFREE - I think that any sort of investment information given when the individual is receiving a fee - even if the fee is ostensibly for recordkeeping and not investment advice - could be construed as providing investment advice for a fee, and this is a licensed activity.

If you simply copy a Morningstar report and send it out, I think that's ok (provided you've paid Morningstar), but when you start pulling out information and putting it in your own format and choosing which information to provide, you could have a problem - I think you could be providing investment "analysis" or advice. I know that at a "national" consulting firm where I used to work years ago there was a policy that only the investment advisor group could provide these types of exhibits - the concern was securities liability.

One person's "regurgitation of information" could be another person's investment analysis. After all, what is investment analysis anyway but the selective organization of information compiled by other people?

My own view as a lawyer who works extensively with "problem plans," fiduciary issues, and recordkeepers is that recordkeepers allow themselves to be pushed into doing things they shouldn't and that they take on too much risk.

exhibits

[BFree]

Libby - thank you. I think we can agree that there is a risk/return tradeoff, and that this is not a settled area.

[Guest FREE401k]

Thanks for the comments, Libby, I totally agree.

Yes, we could regurgitate the RIA's investment information and yes, we know how to tell a client that providing extra services will cost more. Unfortunately, those aren't the question (and I do know what my question is). Those are issues we will get into after we get an answer to our question, which is what others do in this area? If most others provides this service, then we would consider doing it and not charging extra for it (with disclaimers at the bottom of the form, etc.). If most others do not provide this service, however, that will give us renewed confidence in our position that the RIA should provide it.

[BFree]

We do it. In the 3 firms I have worked at over the past 10 years, ranging from a 15-person shop to a large national firm, it has been done.

[mbozek]

Look: performance data for mutual funds is public information -- Fund families must make it available. Merely reciting this information for plan participants ( qtr, last 12 months, 3yrs, 5 yrs and 10 yrs) is not restricted to investment professionals and is not proprietary infomation. Under ERISA a fiduciary needs to provide current information to participants and somebody has to do it. Return on private investments is more complicated and should be give only by an investment professional. In many small plans which do not have an outside investment advisor the fiduciary provides the investment performance data on mutual funds so I cant see how this is the provience of RIAs.