We have a chance to pickup a $5million 401(k) program for about 85 employees. Assuming the paper work and account mtn is handled by whoever, whats a typical asset mgt fee to charge (or is allowable under ERISA)?
I know the fees are low and Is it even worth the bother?
Other perils to be aware of?
Sounds like you don't do a lot of plans. Hartford has a nice book out for free if you ask your wholesaler or local rep. It's called something like To sell or not sell business retirement plans.
A few questions and a few thoughts - stream of consciousness, not really logical order. .
What is the plan currently paying now? A "chance" to pick up a plan will become much better if you know a lot about the plan.
Have you reviewed the 5500 for potential DOL time bombs? I ask in case you are considering taking on a plan with an incompetent TPA (which might not get you in "trouble" but which could cost you a plan in the long run if the TPA fouls up or has been fouling up - particularly with the new regs and added DOL audits going on)
Who is the current provider? How can you position something better/different in a plan on your company platform OR are you making a broker of record play, in which case you are picking up what's already been negotiatated and you have no control over the income stream in the negotation?
Does your firm allow the assets to be carried through (showing on your book of business) or are they held away (not showing, you just get income stream no revenue or asset credit)
Average plans are paying at about 1.0 -1.25 with ranges on payout from say .35 - .75 bps. A plan that size I'd go to .75 bps on the wrap if it's a layup, just to keep it out of someone else's hands, particularly if you don't need asset or production credit and want to farm it for rolllovers and other possibilities.
Will you be giving up a piece because of how it's administered (ie - because the TPA is on the payout, will you have to lowere your take to be competative?) Does your firm have a limit you can charge on their platform? Some firms do.
What is your system for approaching, converting and servicing plans? Do you have an approach you can articulate, and more importantly repeat. The peril to not having a system is you might wind up with a fiduciary gun pointed at your head because you didn't know the regulations and mis speak or mis advise and put yourself in a role you shouldn't be. You would also be smart to have a process because if you don't someone will come along with my systematic approach, specific analysis system, repeatable, scalable service model and pull that plan right out from under you.
The is it worth it question is one you have to answer. Can you (and your team - sounds like you are more than one person) service 85 employees even with a vendor? The vendor will not do everything and you can't expect it. You are point and the pivot between the provider and the plan. You have to take some ownership and control if you want a plan to work out in your favor. If you don't have vendor relationships and if you don't know....find out.
Check the 5500. Are they all (all 85) participants, if not - there are some opportunities to grow the assets by adding participants and hence increase the fees. If they are all participants (or the majority) you may be taking on a mess and a lot of work. Low account balances and maybe not a lot of opportunity to roll IRA's, etc.
Are the participants in the mid to upper end of the earning scale? If not - you may wind up with a plan that has a lot of loans. If they are...is there a Roth component? If not, think to add one, and upsell to that.
Thanks for your input. My company wears two hats: asset mgt and investment banking. We are selling the company (private) to liquify the owners personal net worth which is locked up inside his company -- very common and a huge problem. So I just asked for the K and he said sure. We have talked entirely about the sale aspect not the retire plan. Ideally we'd manage five or six 'funds' on a global basis and let a third party worry about the actual account balances, loans, transfers, etc. I do NOT want 85 different $50k accounts. My BD is JPMorgan.
Given that would do it or not.
Taking Names----Who are you using for plans of $1mil - $5 mil? Anyone know a good TPA out there? Thank you!