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Does your employer sponsored 401k plan utilize a third party plan advisor?
Old 03-23-2008, 08:33 PM   #1
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Does your employer sponsored 401k plan utilize a third party plan advisor?

Currenlty our plan is with Fidelity Investment (direct - no thrid party involved), the company is considering changing the model to utilizing a third party - namely "plan advisor" and move the plan from FIDO. The sales pitch is the "open architecture" where we can choose from any fund familiy not just Fido. In fact, this option is already available through "brokerage link" account at a cost of $100/yr. Other reasons being keeping up with all the requirements of running a plan.

Any plan adiministrator on this board?

mP
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Old 03-23-2008, 09:42 PM   #2
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Our plan recently moved to Fidelity, but we retained our "third party advisors"

They make sure we get only funds with 12b-1 fees and avoid lower cost funds. They are available for advice to plan members (15 minutes each quarter) and they generally answer "don't know" to most questions.

I wish we would get rid of them and go direct, but senior execs seem to like them being involved. Never got a good explanation why.
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Old 03-23-2008, 09:49 PM   #3
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Currenlty our plan is with Fidelity Investment (direct - no thrid party involved), the company is considering changing the model to utilizing a third party - namely "plan advisor" and move the plan from FIDO. The sales pitch is the "open architecture" where we can choose from any fund familiy not just Fido. In fact, this option is already available through "brokerage link" account at a cost of $100/yr. Other reasons being keeping up with all the requirements of running a plan.

Any plan adiministrator on this board?

mP
We recently went from grouped investments to self-directed. One of the issues was whether to go with a single fund sponsor (FIDO, VG, TRP, etc) or an "open architecture" system. As far as I can tell the open architecture plans almost always cost more $ than the single fund sponsors.
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Old 03-23-2008, 10:26 PM   #4
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....
I wish we would get rid of them and go direct, but senior execs seem to like them being involved. Never got a good explanation why.
Liability and deniability.
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Old 03-23-2008, 11:22 PM   #5
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Liability and deniability.
I wonder if that's really it, though. If they just went direct with Fidelity I would have expected they would have as much (or more) protection. Hey, these are among the biggest and best firms in the business, they certainly know all there is to know about running these plans for us and their zillion other clients.

Personally I suspect there's something stranger going on. They have repeatedly offered assurances that it isn't related to the expenses of the plan, and I believe that's so. But I suspect that they offer considerably expanded financial planning to senior execs or some similar service. Hard to make sense of it otherwise.
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Old 03-24-2008, 09:31 AM   #6
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Our plan recently moved to Fidelity, but we retained our "third party advisors"

They make sure we get only funds with 12b-1 fees and avoid lower cost funds. They are available for advice to plan members (15 minutes each quarter) and they generally answer "don't know" to most questions.

I wish we would get rid of them and go direct, but senior execs seem to like them being involved. Never got a good explanation why.

What are the funds available to you?

What else does the third party advisor do aside from employee education?

Do you know the cost structure of your plan?

What is the size of your plan in $MM?

mP
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Old 03-24-2008, 10:05 PM   #7
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The company I'm with uses Fidelity as its third party vendor. But the investment choices are few and expensive from an OER perspective. Fidelity funds plus a few others -- so somewhat of an open architecture. Like the FIDO site, but hate the choices available.

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Old 03-24-2008, 10:17 PM   #8
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Fidelity administers our 401k which consists of many flavors of Fidelity, private (legacy) and non-Fido funds. They have recently reduced offerings and replaced many commercial funds with 'co-mingled pools' which appear similar to thier commercially available cousins. The company uses Ayco Financial services to provide independent counseling which is paid by employee at a basic cost of $80/yr, which is extremely basic.

Our 401k permits rollovers to an IRA which gives access to anything including non-Fido funds, stocks, etc.

I agree that the changes being suggested do not favor the employee.
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Old 03-24-2008, 10:23 PM   #9
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Our 401k permits rollovers to an IRA which gives access to anything including non-Fido funds, stocks, etc.



Jazz: I thought that you cannot rollover your 401k to IRA while still employed?

Do you mean rollover when employment is terminated?

mP
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Old 03-24-2008, 10:23 PM   #10
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What are the funds available to you?

What else does the third party adviser do aside from employee education?

Do you know the cost structure of your plan?

What is the size of your plan in $MM?
Mostly Fidelity Adviser funds. About ten choices plus another dozen life cycle funds. All the Fidelity funds are the FA variants with higher fees. There are three non-Fidelity funds, with similar (1.5% - 2.5%) fees.

I don't see the third party do anything except employee (mis)education. They are technically part of a large full service brokerage and we get monthly newsletters on the flavor of the week. They did a seminar "series" but stopped after the first one. It was a hodgepodge of topics along the theme of this is so complicated you need professional advisers to help you.

Don't know much about the cost structure of the plan. I've talked to HR and folks on the 401k committee who tell me that the plan is billed separately for all administrative costs and that the company pays those directly - so no impact on plan assets. Which sounds very good to me.

Total plan size is a little over 5MM

Why do you ask?
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Old 03-24-2008, 10:31 PM   #11
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Our 401k permits rollovers to an IRA which gives access to anything including non-Fido funds, stocks, etc.



Jazz: I thought that you cannot rollover your 401k to IRA while still employed?

Do you mean rollover when employment is terminated?

mP
Our 401k permits rollovers to an IRA while still employed. Not all 401ks have this feature which is at the whim of the employer, I presume. I am learning that this valuable feature is not common. Read your SPD carefully as I frequently have to "inform" the Fido reps of various uncommon features of our 401k.
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Old 03-24-2008, 10:41 PM   #12
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Wow, when I met with a prospective third party advisor I asked him this question, he told me that it is illegal?

How can I find out if this option is ok with DOL?

Can you point me to any article on this issue?

Thanks,
mP
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Old 03-24-2008, 11:33 PM   #13
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Wow, when I met with a prospective third party advisor I asked him this question, he told me that it is illegal?

How can I find out if this option is ok with DOL?

Can you point me to any article on this issue?

Thanks,
mP
Get a copy of your Summary Plan Descripton and check the details.
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Old 03-25-2008, 04:12 AM   #14
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We were just recently informed that we would be provided with the "benefit" of a third party advisor that would "help" us by managing our investment choices, and work directly with FIDO in making those changes on our behalf. Further, they informed us that it was on an opt-out basis...we would be enrolled in the "benefit" unless we take specific actions to opt out of it. And finally, for all the help "...there is no bill to pay and no reduction in your take-home pay." They will conveniently take the "program fees" directly out of the account balance at a rate of: 0.3% on the first $75K; 0.2% on the next $75K; and 0.15% on anything in excess of $150K.

First thought: Opt-out ASAP
Second thought: What a gig they've got going for using a computer program to provide a "personal recommendation" for my investments. Wish I could get a piece of that action

By reading more of the details, I learned that this is related to the ERISA requirements for automatic investments in retirement plans that were recently amended. This is apparently a "qualified default investment alternative" in satisfying the requirements.
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