With the development of technology, the investment management industry has opened a wide range of options in retirement plans.
An article in inc.com cites the example of Bob Chesner, chief operating officer of Austin-based Giordani, Swanger, Ripp & Phillips, who found that, in the old plan, participants paid 2.17 per cent of assets in between administration, custodial and management fees.
He had later found out that the partners at his 25 employee law firm had picked their plan 15 years ago, before technology made its mark.
But with the recent technological advancements Chesner was able to find a firm that charged only 0.58 per cent of the assets which saved 1.59 percent from the earlier plan.
Technology has made old stalwarts and newcomers to compete alike.
'This market was once dominated by insurance companies that charged between 1.5 and 4 percent of assets. But fees charged by newer, tech-savvy firms can be far lower,' the article states.
Several of the low-cost providers have been in business for years, but the news hasn't yet reached the small-employer market, says Michael Alfred, co-founder of BrightScope, a 401(k) rating service. If you don't yet have a human resources staff, the 401(k) falls to you, while you're busy "trying to get financing, dealing with customers and products, and making payroll," he says.
The secret lies in picking how to pay. 'For instance, Guideline, a new small-to-midsize-plan platform, charges a one-time setup fee of $500. After that, the company levies an administrative fee of $8 per month per participant, each of whom pays on average 0.13 percent of assets per year for both investment-management and custodial services. That gets participants a suite of Vanguard mutual funds they can choose on their own or have Guideline help select,' the article states.
