Benchmarking and Why It’s Important

I am so glad Christopher Carosa wrote the article I’ve attached below called: “Low fees bring these fiduciary Risks-Carosa”. As an advisor to plan sponsors and fiduciaries of employer sponsored retirement plans, I regularly benchmark retirement plans (take them out to bid to compare pricing).
Benchmarking is important because it lets plan sponsors/fiduciaries know where their plan sits in pricing and service with other plans that are similar to their own. It’s one way a plan sponsor can be assured of acting in the best interest of their participants- a fiduciary responsibility. As the article points out, the DOL does NOT suggest that a plan sponsor have the lowest costs. Benchmarking a plan does not mean that the plan sponsor should leave or is ready to leave their current vendors. As the article suggests, plan sponsors need to act prudently and regularly evaluate the service they are getting for the price they are paying.

Therefore, even though advisors hammer on other members of the retirement plan industry to constantly reduce fees, the lowest fees are not always the best for a plan. What about services like foreign language translators, in person meetings, help with fiduciary coaching, company specific plan design, financial literacy, etc. These options and services cost money and the participants or the plan sponsor ought to pay for or share in the expense.
Low fees may be appropriate for English speaking, investment savvy individuals however, those aren’t the only people in an employer sponsored retirement plan. A low fee plan may be efficient at getting money into the market but is it effective at helping participants reach their retirement goal? Perhaps a little higher fee for solid service can help the plan reach both goals of efficiency and effectiveness.
Enjoy the article and let me know what you think:

Read the Article