Whether it's peer pressure or a desire to “do the right thing,” a year after the Department of Labor passed fee disclosure regulations for both defined contribution plan providers and plan sponsors, the industry’s fees are dropping.
Gone are the days when a plan could charge 2 percent or even 2.5 percent in fees. The average today is somewhere between 1 percent and 2 percent.
“Our stance is everyone should be under 1 percent. If you are starting a plan, you should be well under 1 percent. The bigger you are, the lower you should be able to negotiate,” he said.
Most small plans are paying between 1.5 and 2 percent in fees and mid-market plans are paying between 1 and 1.5 percent, Robertson said.
Sharebuilder 401k prides itself on its transparency. It posts its prices on its website and modeled its disclosures after the DOL’s example during the first round of fee disclosure rules so they would be clear and simple to read, Robertson said.
All of the media attention and education that has gone on in the past year is “creating pressure on the marketplace to put in a better solution for employees to save them money,” Robertson said. “Hopefully we are part of that for a lot of people.”
Anton Bayer, CEO of Up Capital Management, believes that some of the reduced fees have gone too far. He pointed out that financial advisors now make a scant 10 to 20 basis points, but they still shoulder a lot of the fiduciary responsibility for the plans they work for.
“Now they are making so little money, the question is whether it is in the best interest of a plan to have advisors who play a key role in the plan and in educating participants be so little vested in the plan. Is it an improvement?” he asked.