Case Study: Too Good to be True?

Case

Large CPA Firm. Plan was on a well-known insurance based platform. Over $14 million in plan assets with 235 participants.

The firm believed that the plan was “free” because it was not being invoiced for services. The mutual funds were performing well enough. Too good to be true? The question was answered when one of the managing partners wondered if the firm could be getting better returns and a greater selection of funds.

Facts

Aside from the mutual fund fees, it appeared that the plan was indeed “free”. There was no group annuity contract charge and no additional fees built into the mutual funds themselves. Of the twenty or so funds offered in this Plan, one Managed Account was charging 1.20%. Over 70% of the plan’s assets were in this account. Uncovering this fee took substantial time and effort. The firm was paying approximately $308,000 (220 basis points—1.20% for the insurance program and approximately 1% for investment advisory services).

Solution:

By changing the Recordkeeper and Custodian, we were able to move the plan to an open architecture system, allowing full access to the mutual fund marketplace. We also replaced the RIA (Registered Investment Advisor), reducing the fee from 1% to 0.25%.

All told, PlanPerfect was able to reduce costs and save the firm approximately $239,865 in both explicit and implicit charges. The revised total cost to the firm was $68,500, or 49 basis points (vs. 220) of plan assets.

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