Your clients and their workplace benefits — which make good fee levelization candidates?

There’s no doubt fee equalization (or fee levelization) for participant retirement plan fees continues to be a hot topic. In the past few months we’ve seen the number of advisors and plan sponsors asking about fee allocation grow significantly. Beyond the basic questions, advisors want to know more about which clients make good candidates. It’s a good question, so we decided to take a closer look.

By examining our block, we actually see a large range of defined contribution plans implementing fee levelization. Clients vary by size, assets and number of participants, demonstrating it can work for many different sizes and types of organizations.

We see it not only in the 401(k) space, but in the 403(b) space as well. This was specifically noted in the recent, Plan Sponsor Council of America (PSCA) 2017 403(b) Plan Survey, a good resource for benchmarking 403(b) plan trends. According to the results:

  • More than a quarter (26.2%) of 403(b) organizations are currently re-evaluating how plan expenses are allocated.

Beyond fee allocation, some 403(b) organizations plan to tailor their investments with a tighter list of investment options — dropping to 26, down from 28 last year. By narrowing the options, organizations can help make investment decisions less daunting for plan participants.

Consider introducing fee levelization to 403(b) clients

Based on the survey results, 403(b) plan sponsors may be ready to make a change. And now is a good time to approach prospects because implementing fee levelization will likely lead to investment option changes that require new participant notices. Putting fee levelization in place before the start of next year may allow plan sponsors to combine participant notices.

 Don’t forget current clients

Fee levelization may work for many of your current clients too, but they may not be hearing from you. Here’s why. Turns out, advisors pitch fee levelization to prospects more often.

In a recent survey we conducted among advisors, more than half (54%) told us they regularly pitch fee levelization to prospects, but only a little over a third (37%) say they’re talking with current clients about it.[1] Don’t let your current clients become someone else’s prospect because you didn’t have the fee levelization conversation soon enough.

If you’re looking for a new market or new ways to reach current clients, consider these ideas:

  • Understand more about trends among 403(b) plans through the PSCA’s 2017 403(b) Plan Survey. As one of the sponsors of the study, we can offer the results to you at no cost —ask your representative of Principal® for a copy, a resource to benchmark a plan and a prospecting list for your area

Get tips to capitalize on fee levelization conversations in our recent webinar. Play recording now.

[1] Fee Levelization Advisor Insights Study conducted by Principal, July 2017.


Affiliation Disclosures

This communication is intended to be educational in nature and is not intended to be taken as a recommendation.


HZ2741K | 274202-1017 |10/2017