Right-Sizing
Art by Jun Cen
Attorneys and accountants are known to do an excellent job of billing clients for their services by the hour. But retirement plan advisers are not always so diligent about striking a balance between their time and the fees they charge clients, particularly in light of the fee compression in recent years. This issue’s cover story, “Smart Design,” lays out six ways that you can ensure you charge the right fees and that all of your clients are profitable; start by segmenting your service model and offering plan sponsors the option to pay for additional services separately. It’s also important to specify your services in the initial service agreement, experts say.
Knowing how your peers run their practices, what their top concerns are, and how they expect to grow their businesses are all key benchmarks to help you run your firm. The 2018 PLANADVISER Practice Benchmarking Survey reveals that fee compression, practice management, adding new clients, practice differentiation, staffing, government regulation and fiduciary issues are advisers’ biggest concerns. Areas where advisers expect their firm to grow in the coming year are continued expansion of 401(k) plan clients, strategic partnerships and fiduciary services.
Highlights from the 2018 PLANADVISER National Conference (PANC), “Pathways to Plan, Participant and Practice Success,” are also featured prominently in this issue. PLANADVISER Top 100 advisers and PLANSPONSOR Retirement Plan Advisers of the Year were amply represented among the moderators and speakers, who explored topics such as “Plan Committee Excellence,” “Understanding the Participant Mind” and “The Future of Retirement Advising.” Additionally, “Plan Sponsors [Told] All” about what they value in an adviser partner.
“Weathering Audits” lays out how advisers can help their sponsor clients prepare for, and sail through, an audit by the Department of Labor (DOL). This is critical information, as the DOL has not only expanded the scope of its examinations of plan sponsors but also extended its purview into the operations of retirement plan advisory practices. The piece details how advisers can play a vital role in guiding sponsors on their fiduciary responsibilities.
Related to this is the fact that advisers need fiduciary liability insurance. “Protection for Your Practice” discusses the challenges advisers face, misconceptions about coverage, the amount of coverage a retirement plan adviser should have, and the factors advisers should consider when selecting a carrier. It is important to note that advisers need insurance of their own, as client policies don’t cover advisers or third parties. Additionally, fiduciary insurance may be unavailable as a rider to directors’ and officers’ (D&O) policies and need to be purchased as a stand-alone. Sources recommend selecting a carrier that has operated in this space for a while and is familiar with the types of lawsuits and claims commonly levied.
Many experts say, just as one should diversify his portfolio, he should diversify his tax exposure. “The Case for Roths” points out the benefits of these 401(k)s particularly among younger participants whose taxes will likely increase in the years ahead as their earning power rises. Noteworthy is that saving the maximum—$18,000, this year—in a pretax 401(k) would be $24,000 in a Roth 401(k) because of the tax advantages