What Plan Sponsors Learned at our Oct 17 2017 Workshop

Couldn’t make our 401(k) Workshop on October 17? No problem – here’s an executive summary for you.

We are willing to bring the case studies to your site including the CPA and SHRM CEUs. Just let us know!

Remember when “paradigm” was very popular in our business vocabulary? Well, we’re bringing it back!

New paradigm: Leading Registered Investment Advisory (RIA) firm O’Reilly Wealth Advisors (OWA) is bringing large 401(k) retirement plan expertise to the small 401(k) plan market. 

401(k) plans of total assets of $2M to $20M were studied. Compared to a competitive fee structure OWA RIA-led plan, unfortunately current big box provider plan costs are high and fee growth rate significantly higher.

However, the typical big box providers (insurance and brokerage companies), and the brokers or registered representatives, some of whom may accept commissions from the big box providers, in our opinion, have failed to drive costs lower. Overall, the big box providers are many years behind the curve. Why rush? Business is profitable and plan sponsors have a lot of fires to fight everyday.

We all know that we have a retirement crisis in the USA. People are not saving enough, early enough, to support a comfortable retirement. Millions of Americans working in small to medium size companies are experiencing lower growth in their 401(k) accounts than is necessary. It’s time the problem is fixed. It’s the not sole cause of the retirement crisis – but it is easily fixed, and will contribute toward improving this nationwide serious problem.

Just as important as current cost in a 401(k) plan is the rate at which the plan costs grow as the plan grows. Because of the big box providers heavy reliance on AUM based fees, the growth rate in costs in their plans are almost always unnecessarily very high. AUM based fees mean fees that are based on a percentage of total plan assets.

Many small plans continue unknowingly with higher fees year after year because they appear, in a sea of unnecessarily higher priced plans, to be “reasonable”.

Compared to a OWA/RIA led competitive 401(k) plan, the following concerning attributes of big box provider led plans were revealed through the 3 OWA case studies.

  • Big box current costs are 12% to 48% higher.
  • Big box 401(k) providers are relying too much on AUM based fees, typical small plan fees grow at a high rate 1% to 1.35% of plan assets.

In competitive fee structure OWA/RIA-led plans, fees grow at a 70-78% lower rate (0.30% of plan assets). For each additional $1M growth in plan assets, growth which is inevitable, that equates to $7,000 to $7,800 savings compared to the big box providers!

The excess fees reduce the growth in each employees account! These additional assets should be in their accounts COMPOUNDING over the years, not lining the pockets of the big box 401(k) providers! Because of the compounding nature of growing assets inside an investment account, the problem is much more devastating than the fees in any one year.

It bears repeating that AUM based fees are a percentage of assets. The larger the employee’s account size, the worse the impact. This means the owners of the largest accounts; typically owners, managers and long term employees, are hurt the most.

Is your plan overly reliant on AUM based fees? What, exactly, are your current fees and the fees on additional assets as the plan grows?

We’ll study your 401(k)/403(b) plan’s fees and funds for you at no cost. The report we generate for you is of very high quality, suitable for filing as proof of due diligence.


If you have any questions

Email Me

Or would like to talk further

(760) 804-0910