Investment Advisor Fees

[Guest BenefitMgr]

Hello, I am wondering if anyone has any data on what an average fee is paid to a third party investment advisor to our 401k plan. Our commitee asked me to determine if the fee we are paying is reasonable, and I have no idea how to find this information. I know it is probably based on the size of the plan, but any ranges or other information would be helpful. thanks!

[david rigby]

Our commitee asked me to determine if the fee we are paying is reasonable, and I have no idea how to find this information.

Normally, discussing fees on these Message Boards is discouraged, since we don't want to be accused of anything remotely related to "price-fixing". Your question may be answered by soliciting bids from other IA providers. Be sure to document what each provider includes, so that you are able to compare "apples to apples".

[Guest BenefitMgr]

Sorry, I wasn't aware that it was discouraged. thank you

[Bird]

I think that question is ok for this board, where few if any of us are true "investment advisors" getting paid a "management fee" that is a percentage of assets.

(On the other hand, we never know exactly which term is appropriate, and maybe more of us, myself included, receive "commissions" that happen to be paid as a percentage of assets and might look a lot like "management fees" but aren't - but I don't see a problem discussing that.)

And what's reasonable depends on many factors, so many that I wouldn't want to try to pick a number or range as "reasonable." So, Benefitmgr, do you mind sharing...

how much money is in the plan in total, how many participants, are you using mutual funds and self-directed accounts or are you paying someone to manage a pool of money, does the same company that handles the investments also prepare compliance tests and the plan tax return or is that done by someone else?

[MSN]

BenefitMgr-

I would discourage you from using the assumption that the payment around the "average" in the industry is reasonable. The fee should be representative of the value provided to plan participants and not weighed against what a typical advisor recieves. Bird brings up many valid factors that you should consider. I would add to that list whether participants are using the services provided, quantitative analysis of the advisors success with regards to the plan and a comparison of the services provided compared with that of like minded firms. The assessment is not an easy one for someone not well versed in plan management.

Have you considered engaging an independent plan fiduciary to either take over the plan management or advise you in the areas you feel it may be appropriate?