Evolution – in a Hurry:
A Desire for Clarity
and Transparency Drive Change Within a 401(k)
Plan
Presented By:
Michael Abbott, Partner, Gardere Wynne Sewell LLP
Marshall Cobb, Investment Advisor, CAPTRUST
CAPTRUST Financial Advisors
p
www.captrustadvisors.com
BACKGROUND
•
Plans historically paid their own way (all recordkeeping,
investment advisory and other plan related expenses charged
against the Plans).
•
Plans used identical menus, relying primarily on actively
managed investments.
•
Significant use of brokerage accounts by participants – often
b i
buying
funds
f d that
h
are similar
i il
to or the
h same as those
h
found
f
d in
i
core menus at higher costs.
•
Revenue sharing had not been quantified.
•
Risk based models that utilized the underlying menu were
heavily utilized by participants.
•
Participant education came via resources attached to the
recordkeeper.
recordkeeper
•
Cobb Retirement (now CAPTRUST) hired in 2007 as the new
investment advisor.
INITIAL WORK
•
Identification of revenue sharing dollars.
•
Negotiations with the recordkeeper to cap revenue and establish
account to capture excess.
•
Negotiations with all parties providing service to the Plans to
reduce fees.
FURTHER THOUGHTS
•
Revenue sharing structure created situation where participants
contributed to the bottom line at varying amounts.
•
Asset allocation, particularly within the models, has a greater
long-term impact on investment returns than individual funds.
POTENTIAL SOLUTIONS
•
Flat per head fee structure for recordkeeping.
•
Primarily
y passively
p
y managed
g
core menus and corresponding
p
g
changes to the models.
•
Investment education program delivered by independent resource.
•
Self directed brokerage remains resource for those that seek
investments not offered in the core menu.
POTENTIAL CONCERNS
•
Change is difficult.
•
Explaining
p
g a new methodology
gy to those that likely
y didn’t
understand the current arrangement.
•
Acceptance of primarily passively managed core menus.
DELIVERY
•
Final round of negotiations with the recordkeeper, aided by an
RFP process, resulted in per head fee and improved fee
structure.
•
Implementation of new menu created significant savings in
investment management fees.
•
All changes communicated in advance and accompanied by an
extensive onsite education campaign.
RESULTS
•
Participants largely pleased with new arrangement.
•
No shift in assets between core menu and brokerage accounts.
accounts
•
No revenue sharing within core menus.
•
Streamlined oversight of the Plans.
•
Significant fee reductions for the Plans.
•
Complete transparency.
ADDITIONAL INFORMATION
Speakers:
Michael Abbott
Partner
Michael Abbott has over 25 years of experience advising companies, executives, and
fiduciaries on employee benefits and executive compensation matters. His practice
primarily focuses on ERISA and related tax compliance involving various aspects of
employee benefits including, but not limited to, tax-qualified plans, nonqualified
deferred compensation plans, and welfare benefit plans. Michael represents clients
before the Internal Revenue Service, U.S. Department of Labor, and the Pension Benefit
Guaranty Corporation in connection with audit and plan correction matters.
Michael also
of employee
transactions
ESOP-related
has extensive experience in the design, implementation, and administration
stock ownership plans (ESOPs) and has been involved in numerous ESOP
representing corporations, shareholders, and fiduciaries with respect to
matters and transactions.
ADDITIONAL INFORMATION (continued)
Speakers:
Marshall Cobb
Senior Vice President, Financial Advisor
Marshall is an experienced retirement plan consultant with a 20-year history
specializing in providing comprehensive advisory services to corporate fiduciaries.
Prior to joining CAPTRUST in 2011, he founded Cobb Retirement Solutions, a retirement
consulting practice in Houston, Texas specializing in qualified plan analysis and
fiduciary oversight for institutional clients representing over $2 billion in assets
under management. A graduate from The University of Texas at Austin, Marshall has been
featured as a speaker at numerous industry events in publications such as MSN
Money, The Houston Chronicle, The Journal of Pension Benefits and The Houston Business
Journal.
Journal
He is a member of the Southwest Benefits Association (SWBA), the Financial Planning
Association (FPA), the Society for Human Resource Management (SHRM), the American
Society of Pension Professional & Actuaries (ASPPA) and the Institute of Certified
Bankers (ICB). Marshall holds the Certified Retirement Services Professional (CRSP) and
Accredited Investment Fiduciary® (AIF®) designations.
FOR MORE INFORMATION
Michael A. Abbott
Partner
[email protected]
The information provided in this presentation is for
Gardere Wynne Sewell LLP
educational purposes and should not be construed
1000 Louisiana, Suite 3400
as individualized investment advice. This is not a solicitation
Houston, TX
or an offer to buy any security or instrument or to participate
77002
713.271.5571
in any trading strategy. CAPTRUST Financial Advisors does
www.gardere.com
g
not render legal, accounting, or tax advice. Clients should
consult their tax professional or legal counsel for such
advice.
Marshall Cobb
Senior Vice President, Financial Advisor
[email protected]
p
CAPTRUST Financial Advisors
1035 Dairy Ashford
Suite 340
Houston, TX 77079
877.660.9605
www.captrustadvisors.com
Member FINRA/SIPC
© 2012 CAPTRUST Financial Advisors