Fees Can Be Touchy Subject for Advisers
October 20, 2014
No one wants to talk about it, but everyone wants to know: How do other retirement plan advisers arrive at a fee for their plans? Here, some advisers weigh in on their methods.
The basis of compensation—flat fee or using a percentage of plan assets—is one of the biggest dividing lines in determining fees. More advisers seem to be using a flat fee to charge institutional retirement plans for their services, but they might wind up with comparable fees in the end.
Masood Vojdani, president and CEO of MV Financial in Bethesda, Maryland, works on an asset-based compensation model until a plan hits $100 million. “If plan assets become too large, a flat fee is the only way to remain competitive in pricing,” he tells PLANADVISER.
Up to that size, Vojdani turns to quantifiable factors such as the size of the assets, number of participants, level of service and hours of service dedicated to the plan to calculate a fee. Investment strategy and active management of the plan’s portfolios are also considered, since they require the firm’s time and staff service.
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