Recordkeeper with no advisor

[austin3515]

Does anyone know of a recordkeeper will take a plan with no advisor?  I think Employee Fiduciary mught be one?  If so, what have the sponsors done for an investment line up?  I was thinking the sponsor might choose just offer some series of target date funds...

We have a decent number of clients who won't leave brokerage accounts because they don;t want to pay 50bps to an advisor. And some plans are so small no advisor would ever take them.

[WCC]

I know of a couple online 401k recordkeepers who can operate with or without an advisor. This is not an endorsement as I have never worked with them, but I know of 401Go or Guideline 401k. Both have a 3(38) investment management offering that a plan sponsor can rely on for an appropriate investment line up. They will pay a fee for the 3(38) service, but it will most likely be less than 50bps.

But if you are looking to do the TPA work, these two are not built to unbundle. 

[austin3515]

13 hours ago, WCC said:

But if you are looking to do the TPA work, these two are not built to unbundle.

Too bad.  I guess the 3(38) is the way to go. I've seen them for 7/8 basis points before.  Of course they wont do a darn thing for you, but then again you don't need them to.

If I take that lead and run with it, has anyone seen a RK platform that will just use one of those 3(38)'s as the advisor (i.e., a Morningstar or Mesirow), and not a traditional advisor (and unbundle)?  Can Am Funds RK Direct do this?? Come to think of it TIAA does this.  But I think if TIAA were the last 401k vendor on earth I wouldn't put a new plan there!

[Bird]

On 10/9/2020 at 5:04 PM, austin3515 said:

Does anyone know of a recordkeeper will take a plan with no advisor?

T. Rowe Price

[austin3515]

With a 3(38) attached?  (updated:  I emailed our contact at T Rowe, and will update when I hear back).

[WCC]

I remembered over the weekend that Voya offers a product called Flexprecision. They use a third party 3(38) manager in which a plan sponsor can use it without an advisor. It can be used unbundled. 

[Peter Gulia]

Just curious, what about situations in which a small-business employer that is a retirement plan’s sponsor and administrator uses no § 3(38) manager, no § 3(21) advisor, and not even a non-fiduciary investment advisor.

 

What if a plan’s sponsor/administrator selects the plan’s investment alternatives (within what’s available on a recordkeeper’s platform) with no guidance from anyone?

 

Is a recordkeeper service for such a plan available in the small-plans markets?

 

And if a recordkeeper is reluctant to offer its service to such a plan, what worries them?

[Bird]

4 hours ago, austin3515 said:

With a 3(38) attached?  (updated:  I emailed our contact at T Rowe, and will update when I hear back).

I think so.  Also Vanguard has a program with Ascensus as RK with a "direct" (no broker) relationship.

[WCC]

10 minutes ago, Peter Gulia said:

And if a recordkeeper is reluctant to offer its service to such a plan, what worries them?

My opinion is the recordkeepers biggest source of revenue comes from financial advisors bringing them business. The RK does not want to be in situation where they compete with advisors and therefore upset their referral base. Some offer a direct solution (without an advisor), not sure if they require the use of their 3(38) service to be direct. They offer the 3(38) service since most plan sponsors know (or should know) that they need help selecting and monitoring an investment line up.

[austin3515]

Update:  T Rowe Price offers this with a choice of Invesnet or Mesirow as the 3(38) with no traditional advisor.  From a business/relationship perspective AND from a philisophical perspective I believe strongly in the role that an advisor plans. But there are plans that my best relationships would not want to go anywhere near because they are too small, and I have others where the client will not under any circumstance incur an additional expense.  It is these two scenarios that this would be a good fit.  In fact two I have in mind rejected very competitive investment advisory scenarios and opted to keep the "cheap/free" Fidelity Non-Prototype accounts.

[Bill Presson]

23 minutes ago, austin3515 said:

Update:  T Rowe Price offers this with a choice of Invesnet or Mesirow as the 3(38) with no traditional advisor.  From a business/relationship perspective AND from a philisophical perspective I believe strongly in the role that an advisor plans. But there are plans that my best relationships would not want to go anywhere near because they are too small, and I have others where the client will not under any circumstance incur an additional expense.  It is these two scenarios that this would be a good fit.  In fact two I have in mind rejected very competitive investment advisory scenarios and opted to keep the "cheap/free" Fidelity Non-Prototype accounts.

Austin, we've done some of these before. We usually use the Vanguard/Ascensus plan set up. Just be careful you don't get pulled into doing things the advisor would do. We consistently had to push back on the sponsor about employee education and answering participant questions, etc. They tend to lean on you as the expert in all things without that additional body around.

[austin3515]

Agreed, but it seems that I'm already in a similar situation with these brokerage accounts. 

[MWeddell]

You all work regularly in a market with different size plans that I do.  In the large and jumbo DC plan market, one seldom sees plans pay a percentage of assets to an investment advisor.

[austin3515]

A different market?  A different industry altogether. Nay, a different world!

[Patricia Neal Jensen]

TIAA

 

[Peter Gulia]

That bigger and smaller plans are different markets, and perhaps in some ways different worlds, is often a reason I read BenefitsLink.  My learning about small plans and services for them is indirect.  A little bit is from volunteer work for charities.

 

WCC and austin3515 and Bill Presson, thank you for your observations about why a recordkeeper might be reluctant to serve a plan that lacks an advisor.