PLANADVISER - November/December 2019 - 15

including legislators, has been focused
on the first two gaps, but we haven't
spent a lot of time addressing the
income gap in retirement. "
Stokes does not foresee sponsors
embracing
retirement
income
solutions en masse for a while. In the
interim, she suggests that advisers
consider " incremental plan design
changes such as making sure the IPS
[investment policy statement] allows
for systematic withdrawals from the
plan in retirement as opposed to a
lump-sum distribution. "
Doug McIntosh, vice president of
investments at Prudential Retirement,
says he thinks the time has come for
" advisers to be knowledgeable and
experienced about income options "
and that, certainly, retirement income
solutions should be included in financial
wellness programs. In fact, he
says, at the annual meeting of Prudential's
top advisers, they are educated
about retirement income options.
Right now, there are three main
approaches to retirement income,
McIntosh says: best efforts, fixed
annuities and guaranteed withdrawal.
The best efforts include target payout
funds, bond ladders and customized
liability-driven investing (LDI) solutions.
" Thoughtful asset management
professionals and advisers are
creating careful allocations, but there
are no guarantees associated with
them, " he says.
The fixed annuities are either immediate
or deferred, and these provide
guaranteed retirement income for the
rest of the purchaser's life; they can
include spousal benefits in the event
of the owner's death; a set, guaranteed
number of years of payments; and cash
refund options, McIntosh says.
The guaranteed withdrawals are a
hybrid of the first two and allow the
owner to retain control over the underlying
assets, he says.
According to Stokes, already some
target-date funds (TDFs)
incorporate
annuities as a person retires, but " these
are geared to plans with $1 billion or
more of assets, " she says.
McIntosh notes that plan participants
are thirsting for guaranteed
income solutions. -Lee Barney
How Plan Advisers
Justify Their Fees
Despite fee compression, advisers are pushing back
ONE adviser charges a flat fee up to
certain asset levels and then additional
basis points (bps) as plans grow, while
another stresses the detailed, timeintensive
fiduciary work he does for
clients, when asking for a fee increase.
Many retirement plan advisers call
fee compression a race to the bottom-
a bottom where quality and value have
little to no place. Some advisers are
countering by not only justifying their
fees, but even asking for a raise.
expanded their businesses through
mergers and acquisitions, whereby
a plan that was $30 million in assets
becomes a $100 million plan with all of
the work that involves, and I have not
increased my fees, " Lander continues.
Ideally, Lander says, advisers
should charge an hourly fee as attorneys
and accountants do, but clients
are highly resistant to that. She recommends
that advisers charge a flat fee
up to $50 million in assets and then
" While we are close with all of our clients
and encourage dialog, I struggle with
speaking with them about what fees
are appropriate and reasonable. "
Don Duncan, managing director
of Savant Capital Management, says,
when negotiating a fee increase with
his clients, he emphasizes all of the
3(21) and 3(38) fiduciary work he does
for them. He says he is also willing
to take on more work for clients by
offering more education and, potentially,
financial planning for employees
and corporate executives.
When Ellen Lander, principal of
Renaissance Benefit Advisors Group,
founded her practice, she charged a flat
fee to all of her clients. " Five years later,
I realized that was a terrible mistake, "
she says. " While we are close with all
of our clients and encourage dialog, I
struggle with speaking with them about
what fees are appropriate and reasonable.
For example, I have one client who
has been with our firm for 11 years. Its
assets have tripled and now encompass
three plans. I have handled three RFPs
[requests for proposals] for them, and I
have never increased my fee.
" Many of my other clients have
add a 2-to-3-basis-point " cost of risk
factor " on assets up to the next level
of $100 million and continue in that
fashion as assets grow. " Other advisers
say, just renegotiate your fees every
three years. I'm uncomfortable with
that, " Lander says. " Rather, this feels
like a fair way that takes into consideration
the growth of the plan. "
Lander says advisers should also
have the mettle to tell clients who ask
for extra work that it is beyond the scope
of their contract and charge an hourly
fee for that work. " I've had to learn painfully
to speak up quickly and boldly
when something is out of scope, " she
says. " The cautionary tale is to realize
upfront that you cannot envision how a
plan will grow. We know that, as plans
grow, there is additional liability. "
The main thing for advisers to
consider, Lander and Duncan both say,
is that it is warranted for advisers to
justify the value they bring to clients
and discuss with them what fees are
reasonable. -Lee Barney
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PLANADVISER - November/December 2019

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