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RESOURCES:
Vendor Value Index |
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Overview
Hiring and managing investment and administration vendors for retirement plans and foundations is complex and risky. Complex due to confusing jargon and interlocking vendors. Risky because buyers are at a major information disadvantage.
Vendors are specialists in the design of their products, services, and compensation arrangements. Executives that buy from these vendors do not have the vendors' degree of specialization. The result? Vendors have a critical information advantage over their clients.
The information advantage is the root cause for excessive fees. Retirement plan participants and donors to charities suffer from these excesses in the form of sub-par investment returns. But now, executives that tolerate excessive fee arrangements are at risk, too.
Risk Potential
By applying forensic analysis, Roland|Criss developed a way to uncover and document excessive fees ...the Vendor Value Index™. It covers all service provider types in both the retirement plan and foundation communities. Here is an example of how it looks...
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• Five Views of Vendors' Fees
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• A Customized Resource
The Vendor Value Index succeeds where mere fee benchmarking fails.
- Unbiased and impartial analysis.
- Exposes wrong pricing structures and shows how to correct them.
- Converts hard to evaluate services into financial values.
- Makes apples-to-apples comparisons of vendors a reality.
- Eliminates confusing jargon.
- Complies with the new ERISA 408(b)(2) fee disclosure rule.
- Satisfies UPMIFA's test for excessive fees.
- Customized to take into account every detail.
- Not a boiler plate report produced by an agent for a vendor.
- Includes investment managers such as mutual funds, investment advisors, third party administrators, recordkeepers, and custodians.
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• Case Studies
Excessive Investment Fees
Type of Fiduciary Organization: ERISA plan sponsor (Unisys Corporation)
Dollar Value of Assets: $1 billion
Vendors: investment consultant; investment managers; recordkeeper; custodian
Complaint Type: Lawsuit by retirement plan participant
Result: Negotiations underway on the dollar amount of a settlement
Excessive Fees to Multiple Vendors
Type of Fiduciary Organization: ERISA plan sponsor (private religious organization)
Dollar Value of Assets: $8 million
Vendors: securities broker; insurance company annuity product providing investment managers; recordkeeper; custodian
Complaint Type: Department of Labor audit
Result: Plan sponsor paid $550,000 in restitution and legal fees
Excessive Investment and Administration Fees
Type of Fiduciary Organization: ERISA plan sponsor (Edison International)
Dollar Value of Assets: $13 million
Vendors: investment consultant; investment managers; recordkeeper; custodian
Complaint Type: Class action lawsuit for excessive investment management and administrative fees and inadequate investment performance
Result: Plan sponsor ordered to pay $350,000 to participant
Excessive Investment Fees
Type of Fiduciary Organization: Endowment and foundation (Hillcrest Children's Center)
Dollar Value of Assets: $16 million
Vendors: securities broker; investment managers
Complaint Type: Improper selection of investment consultant and investment managers
Result: Lost $8 million
Excessive Investment Consulting Fees
Type of Fiduciary Organization: Endowment and foundation (religious seminary)
Dollar Value of Assets: $50 million
Vendors: securities broker; investment managers
Complaint Type: Financial forensic audit
Result: Lost $150,000 in unaccounted charges
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• Learn if Your Vendors' Fees are Reasonable
The Vendor Value Index is increasingly recognized by chief financial officers as the premier indicator of proper pricing for investment and administration services. It avoids the expense of an RFP. The Index is customized and released on a regular recurring schedule that accommodates the needs of each client.
Learn how to get your customized Vendor Value Index report.
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