Does this sound familiar? You have a client you genuinely like. You are always excited to do good work for them. They appreciate you and your efforts. But, however, it’s been a few years since you’ve had the fee for service conversation. You didn’t purposely avoid this hard conversation. Time just naturally passed by.
Even though you deep-down felt that you were getting paid below market, they are good clients. And good clients are worth their weight in gold, right? So, the conversation got pushed off.
Alas, we are facing the COVID-19 crisis and what should be a sunny day to discuss a fee-for-service, now, life is a little more complex. Rather, addressing such a fee true-up topic would be uncouth and severely disconnected with the happenstances of the present moment.
However, it doesn’t change the importance of consistent fee benchmarking. Whether it is spot checking recordkeeper costs, investment fees, advisory compensation, or total plan expenses, these current economic events are a bellwether siren signaling as to why we should all get comfortable with the hard conversation around fees.
Everyone deserves fair pay
Plan advisors should be paid reasonably given their expertise, mastery, understanding, and level of service/guidance to plan sponsor clients. Recordkeepers need to be paid based on a fair calculation to meet modern plan sponsor and participant expectations (e.g. online portals, payroll integrations, mobile friendly access). All 401(k) service providers should be actively benchmarking their fees to confirm that they are reasonable; and with proper benchmarking, these assessed fees should accurately reflects a healthy business model. All parties deserve fair pay.
As they say, “hindsight is 20/20”. It will certainly be easier to identify things after these events are over; yet, it’s a reminder as to the importance of why plan advisors should consistently benchmark plan fees. Following the guidance of 408(b)2, plan sponsors need to review, evaluate, and confirm that plan fees are reasonable, but benchmarking should be more than that. It is also an opportunity to renegotiate fees to confirm that you are properly compensated for your services.
Benchmarking is an ongoing conversation
Even with our current turmoil, it is still important (and required) to benchmark plan fees. While it may not be the best time to ask for a fee increase, this abrupt turn of events should serve as a future reminder that even if addressing fees might be a hard conversation, it still needs to happen and shouldn’t slide to the next quarter’s agenda.
You are a top-notch professional with retirement plan expertise; you should be paid accordingly for your knowledge.
Thankfully, our industry has wonderful access to benchmarking reports, allowing 401(k) service professionals to easily access accurate reports that clearly outline a range of reasonableness. This helps 401(k) service providers to have better, validated, and research-based conversations with accurate industry intelligence. Use these reports as proof points to justify plan costs and fees. These reports will help to transition your conversation and solidify a research-backed conversation with grounded industry facts.
While the tide has turned swift and fast across the globe, this is not the best time to initiate increasing plan expenses; yet, it serves as an excellent reminder that in the future, benchmarking should be regularly discussed and always hold a firm place on meeting agendas.
Thanks for reading and Happy Marketing!
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Retirement Plan Marketing is a product of 401(k) Marketing and is an ongoing turnkey marketing solution for retirement plan advisors. It is an easy-to-follow, consistent marketing program designed to get you noticed in your community and generate new retirement plan sales. When you deliver relevant plan sponsor content, you add value to your conversations and can work your way up to become known as the “go-to” retirement plan advisory office. www.retirementplanmarketinginabox.com