new American Funds pricing for RKD

[Bird]

Nobody's brought it up so I will...the RecordkeeperDirect platform, which was perfect for micro plans, is changing pricing from an average account balance basis to a total assets basis.  A plan that was no cost with average assets of $5000 is now going to be $500 setup for a startup and $750 + $20/participant per year.  It's a punch in the gut for us; tough to add those prices to our fees when selling a plan for a handful of people.

So...what are the options?  John Hancock (meh)...Voya (meh)...?  I really really hate using individual brokerage accounts and effectively recordkeeping in house, manually. 

Appreciate any thoughts.

[austin3515]

I've been successfully selling pooled plans in these situations.  Participant direction is just not cheap, that's the bottom line.  Then they grow into a participant directed platform.  Advisor's put the whole plan generally in just one single balanced-type fund.  P.S. the balances are by definition small. 

AFRKD service was just too good to make any money on a $100,000 plan.

[Earl]

Reasonably priced, competent recordkeeping only services for small start up plans is similar to the search for the Holy Grail.

I believe it doesn't exist.

[ETA Consulting LLC]

In house recordkeeping for plans with individual brokerage accounts is, certainly, something to consider.  Given these prices, it would be easy to compete for plans with 5 or fewer participants.  Something I'm pondering myself :-)

Good Luck!

[austin3515]

Check out Fidelity Non-Prototype if you're going to go that way as a non-advisor.  It's decent bear bones stuff but that's all you need.

 

[Mr Bagwell]

Man, this IS looking for the Holy Grail!

*****I'm not doing this, but I hypothesize.*****

I suppose that if wanted to do micro plans as a record keeper only, I probably want $250 setup and $500 for the service.  Weekly contributions might bump the price up a little.  Electronic statements a must.  You do the plan, plan notices, investment choices, and relationship work.  I'm sure I'm missing something... but just thinking out loud.  .40 basis points after 125,000 in assets.(in lieu of $500, but $500 minimum)  Institutional funds, I'm not messing with 12b-1 or ssf....  Your fee on top.

This scenario still might be light for some and expensive for others.....

Tough market to be in as there is so little money to make.  But, if the record keeper were to get 50 plans under their belt, it would be a nice little pad to the bottom line.

Just my thoughts....

[austin3515]

I'm telling you, don;t underestimate the pooled plan.  I get people to do it almost every time for the micro start-ups.  There just is no plan B (no pun intended).  For those of you who say "Forget it too much liabiility, you're forgetting that no money = no liability.  A $100,000 pooled plan, or even $200,000  would have really any liabiility even with a bad fund.

[RatherBeGolfing]

1 hour ago, austin3515 said:

I'm telling you, don;t underestimate the pooled plan.  I get people to do it almost every time for the micro start-ups.  There just is no plan B (no pun intended).  For those of you who say "Forget it too much liabiility, you're forgetting that no money = no liability.  A $100,000 pooled plan, or even $200,000  would have really any liabiility even with a bad fund.

100% agree.  Pooled plans work great in the micro market.  I do them all the time.

[K2retire]

18 hours ago, Mr Bagwell said:

Man, this IS looking for the Holy Grail!

*****I'm not doing this, but I hypothesize.*****

I suppose that if wanted to do micro plans as a record keeper only, I probably want $250 setup and $500 for the service.  Weekly contributions might bump the price up a little.  Electronic statements a must.  You do the plan, plan notices, investment choices, and relationship work.  I'm sure I'm missing something... but just thinking out loud.  .40 basis points after 125,000 in assets.(in lieu of $500, but $500 minimum)  Institutional funds, I'm not messing with 12b-1 or ssf....  Your fee on top.

This scenario still might be light for some and expensive for others.....

Tough market to be in as there is so little money to make.  But, if the record keeper were to get 50 plans under their belt, it would be a nice little pad to the bottom line.

Just my thoughts....

You've described almost exactly what the Lord Abbett bundled plans used to look like. At one time there were as many as 8,000 of them. When they quit selling them, the Prime Plan Solutions division of DST Systems continued to offer them with a wider choice of investment options. Sadly, DST sold that division in 2016 and I don't think they are available any longer.

[austin3515]

Let's not forget to mention the old Vanguard small business platform. That thing was a dream and a go-to.  Was real sorry to see that go, had to be 5 or 6 years now.  That's when we switched those plans over to Fidelity Non-prototype or Investment only accounts.

[TPAJake]

DST will sell you the same backbone that RKD, AXA, Mass/Hartford & others have purchased to run their platforms--Can you imagine "Austin Powers 401(k) Systems"?  You would have some serious name recognition & the ad slogans just write themselves!

[austin3515]

Running a daily val shop is something we have, with good reason, avoided like the plague...

[TPAJake]

In all seriousness, we have used a company called Aspire in the past for plans of this size because of the flexibility that's built into their system, but their fees may have changed drastically since I was in the micro plan business.  It's not quite as clean & sorted as the other platforms out there, but it's sufficient for a TPA's purposes & their customer service is pretty good.  

[Mr Bagwell]

2 hours ago, austin3515 said:

Running a daily val shop is something we have, with good reason, avoided like the plague...

Lol, Austin.  I'm sitting here thinking that daily valuation is about the only service I've done.  I had a few quarterly's back in the day, but we moved them to daily asap.

[Gilmore]

What is the max size that you would consider for a pooled plan?  Let's say it is an owner and 3 employees?  Is everyone on the investment committee?  Who decides what the investments will be?  Does the owner want to take on that responsibility alone?  I've seen some nice small groups get pretty ugly in a break up, and I'm sure a pooled 401(k) would be just one more straw for the camel's back.  A balanced account sounds nice until the market shoots up and one guy wants to know why he isn't seeing the gains he is reading about in the paper.

[austin3515]

Well that;s not necessarily a fair question.  I have a pooled plan with $500,000, but $475,000 is the owners...  And just the owner is on the investmetn committee.  My historical experience is that most employees have very little interest in that sort of thing.

[Bird]

And a good theoretical case can be made that the industry has it all wrong and that participants should NOT be self-directing, especially the little guys.  Inevitably many will be too conservative or too "aggressive" (polite euphemism for "stupid").

But it's a waste of breath.

I do want to thank everyone for their comments; I realized that what I can do is show a pooled account as a zero-added cost option and then give the option to self-direction with those costs and let them decide.  Seems basic enough but since AF was generally no-cost, I got out of that mode to try to streamline proposals.

[RatherBeGolfing]

1 hour ago, Gilmore said:

What is the max size that you would consider for a pooled plan?  Let's say it is an owner and 3 employees?  Is everyone on the investment committee?  Who decides what the investments will be?  Does the owner want to take on that responsibility alone?  I've seen some nice small groups get pretty ugly in a break up, and I'm sure a pooled 401(k) would be just one more straw for the camel's back.  A balanced account sounds nice until the market shoots up and one guy wants to know why he isn't seeing the gains he is reading about in the paper.

I have plenty of pooled plans in the 25-30 participant range.

Investment committee is normally the owner(s) who in turn gets an investment adviser to handle the investments. I never recommend that an owner to actually make the investment decisions, but they do pick the investment adviser.  One of the goals (or at least my goals) is to get participants and owners as far away from making investment decisions as possible.

[austin3515]

Ahh, but such a plan could be housed at a recordkeeper. Different animal altogether from the OP, I think.  I have pooled plans with 10s of millions and hundreds of participants.