PLANADVISER - November/December 2021 - 37

budget for provider fees, whether paid by plan assets or by
the sponsor, so they need to know roughly what the [adviser]
fee is each year, " he says. " If fees are paid by the plan, it will
affect participants. If they are paid by the sponsor, they will
need to be included in a budget. "
There are a few service exceptions for Fiducient's model;
Gardner says these are common extras in the plan adviser
industry. For example, his firm charges an additional fee
for participant education. " For a client that would want us
to come out quarterly to meet with participants, we might
charge a fee of $1,500 per day, " he says. There would also
be a separate charge for issuing a request for proposals
(RFP) for finding a new plan provider-a lengthy process
that includes crafting the RFP questions to address the
plan sponsor's needs, scoring responses and holding finalist
meetings. " Beyond that, there are not many things clients
could ask for help with that would incur an additional fee. "
Joe DeBello, managing consultant at OneDigital in
Orlando, Florida, previously used the standard-fee approach,
with " no line drawn in the sand " about what was in scope
or out of scope for services; it included investment benchmarking
and RFPs.
Charging a standard fee lets firms eliminate the need to
continually rethink what is a core service, DeBello says. A
challenge though, he notes, is that, historically, increases
on flat fees have been few and far between, so charging for
one-off events-e.g., performing pre-merger-and-acquisition
(M&A) due diligence or creating custom communications-is
a way for advisers to ensure they get properly
paid. " [Even] if a firm believes it won't have many one-off
events-say, if it serves mostly small-plan sponsor clients-
it might make more sense to charge a standard fee, " he says.
OneDigital is moving toward defining a core set of services,
for which it will charge a defined, non-asset-based advisory
fee. It will list separately other, commonly requested,
services, with the fee it is charging for each. " This would be
determined on an office-by-office or adviser-by-adviser basis,
while we all operate off the same contracts or agreement, "
DeBello says.
" Collectively, practice leaders spend a lot of time together
discussing best practices and the changing marketplace, " he
continues, " and there's been much agreement across offices
on clearly defining 'in scope' versus 'out of scope,' and
ensuring the time spent on extra project work gets properly
billed to the plan sponsor. " He adds that M&A activity,
currently at an all-time high, has added to the workload of
many consulting teams.
With a per-project fee model, there might be one fee for
core services, which include drawing up an investment policy
statement (IPS), producing quarterly reports and meeting
with the committee on some regular basis, plus other fiduciary
support services such as plan provider fee benchmarking.
The per-project pricing comes in for services above
that, Gardner says. The difference between this fee model
and a flat-fee model is that, in this one, fewer services are
considered core; more fall under the " per-project " heading.
A per-project fee model would charge for recordkeeper
searches, participant education, extra committee meetings
or calls, an investment manager search, and regular recordkeeper
due diligence by, for example, issuing a request for
information (RFI).
Another area that generally demands an extra fee is
adviser managed account solutions. " I think this will likely
evolve over the years with the continued adoption of these
by plan sponsors, " DeBello says.
From OneDigital's vantage point, asset size does not
necessarily dictate complexity, DeBello says. " We consider
ourselves a full-service consulting firm that's not just
focused on investment advising but also on day-to-day plan
administration. Complexity generally has more to do with
whether a client has multiple locations or multiple plans, "
he says. " Size might have some bearing on it, but we're
looking at hours spent serving our clients. "
Both advisers agree that simplicity in fee models helps
sponsors, if they know what requests they will pay a fee for.
The average plan generally does not have one-off events, he
says, but it can be hard to gauge what activity level there will
be, especially with a new client. " The concern for advisers
is underpricing when the demand on their time might be
higher than anticipated. That's the downside of charging a
standard fee, " DeBello says. " That's why we're hearing from
OneDigital colleagues and other firms that they are going to
start charging for different services. "
OneDigital is trying to use efficiencies that make a perproject
fee model less complex for clients. " We're trying
to standardize project-based work versus core services, "
DeBello explains. " In our service agreements, we list core
services in language that clients will understand. We might
provide a calendar of core services then outline in the agreement
some of the most common add-on services such as
targeted communications or HSA [health savings account]
education. We don't provide a laundry list of anything that
can happen but a list of the most common items that would
not be included in our core fee. "
Variations in Fee Models
There are still firms that charge fees based on plan assets,
says Gardner. He says he believes asset-based fees are
primarily charged by firms in the smaller end of the market.
In last year's PLANADVISER Practice Benchmarking Survey,
across all respondents, two-thirds (67%) of their clients paid
some sort of asset-based fees.
For large and mega plans-for which 3(38) investment
management has become more popular, Gardner says-that
service might be priced based on plan asset size, as well.
However, DeBello says, he has seen a combination of a
standard fee-for-service with a smaller asset-based fee to
compensate advisers for additional projects.
He says he had an interesting conversation with an adviser
about fee models. The adviser uses a flat-fee model but said,
had he not worked with sponsors to establish regular costof-living
increases, he might have used a different model.
" Building in cost-of-living increases on fixed amounts that
way will become the norm, " DeBello says. -Rebecca Moore
planadviser.com November-December 2021 | 37
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PLANADVISER - November/December 2021

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