PLANADVISER - Special November 2009

Second, look at metrics around how their investing behavior looks. Ulti mately, you want participants to have a diversified portfolio, so that is what you should measure. Finally, take a look at what happens when participants terminate. Are they taking their pre retirement money and buying the bass boat or the big screen TV? These are definite metrics that look at what basi cally happens to money in a qualified plan: You put money in, you invest it, you take it out, and each one is impor tant. In fact, there’s a mathematical example on Fiduciary Benchmarks’ Web site where a 50basispoint fee differential is clearly outweighed by someone who rolls over his money versus somebody who doesn’t. So, mathematically, it can be absolutely proven that all three are critical. So, if you follow the money, you will have the right benchmarks

However, there is one new set of metrics and it reminds me of the quote from the Cheshire Cat in Alice in Wonderland: “If you don’t know where you are going, any road will take you there.” So, I think the best providers also are trying to make sure each employee has an individual retirement goal and they are measuring the prog ress each employee is making toward that goal. To me, this is the most critical metric and what our industry is ultimately all about.

PA: How do you benchmark the services an adviser provides to a client?

Kmak: When I look at an adviser, I
see him or her as having an impact in
three major areas. The first one is in

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a;$1;million;
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—Reish

the fiduciary oversight and best prac tice component about what’s going on in the industry. These issues can really make a difference for the plan, and a really good adviser makes sure the client is aware of each of them when applicable.

The second thing is that they do a really good job of making sure the client focuses on the right participant metrics: participation rates, investment behavior, rollover rates—those things already mentioned. A really, really good adviser can make sure that programs are in place to ensure those metrics are moving in the right direction.

Then, of course, there are some of the more typical things associated with an adviser: quarterly meetings, oneon one meetings, or financial planning, which Barbara has mentioned has taken a back seat recently. All of those are very important services, too. So, I see advisers helping clients in three areas: support, services, and success measures.

PA: Tom, how is the Fiduciary Benchmarks service priced, and how can it help advisers with their practice?

Kmak: Our service is priced in one of two ways. You can buy an annual license that depends upon the plans, so someone like Barbara who has more plans and larger plans pays more than an adviser who is just getting into the industry and starting with small plans. The license allows you to use the service as often as you want. About twothirds of the more than 100 advisers we have signed have chosen that model since it is an easy fixed expense. The other third of advisers buy plans one at a time, with plans under $10 million paying less than $100 for a report and plans with more than $1 billion in assets paying about $1,000 per report. We found it was important to provide the adviser community with flexibility in our pricing.

PA: Final question: Some people argue that service is a commodity in many ways and that all we need to worry about are fees. What do you say to that?

Kmak: Well, if we were at commodity status, every participant in America would be on track for a secure retire ment and every plan sponsor would be safe from litigation. So, clearly, we still have plenty of room to improve and, since what gets measured gets managed, we better make sure we are measuring, or benchmarking, the right things.