There’s been a lot to focus on in recent months: the fiduciary regulation, a new wave of excessive fee litigation, and continued consolidation in the industry. Will any of that affect the fees or services offered by NAPA Net readers?
The answer, as you might expect, varies. A plurality of the respondents to this week’s NAPA Net reader poll (36%) said they planned to change neither services nor fees in 2017. An additional 14% said that they didn’t plan to change for existing clients, but would for new clients, and about half that number were planning to offer the same services but charge more. As one reader explained, “I expect the new law will increase my E&Os, so I will increase my fees. The oil companies do it all the time.”
That said, about 15% were offering the same services, while moving to a fee-based model, another 9% were expanding and/or adding services, and the rest didn’t know yet.
Those planning to raise fees aren’t planning to do so by much, however. A plurality (about 45%) said it would be by less than 5%, 16% said they would charge 5% to 10% more, and a similar number said the increase would be in the 10% to 15% range. The rest weren’t (yet) sure how much, or hadn’t yet figured out how the incremental changes would add up overall – or hadn’t yet gotten an idea of how much some of their costs were going to increase, and so hadn’t done the math.
New clients – at least those of the respondents who were planning to increase fees for their new clients – are likely to be looking at costs that, at least compared to what was being charged in 2016, are anywhere from 5% to 15% higher. Although, as noted earlier, one in eight of the respondents who are planning to charge more haven’t yet figured out how much.
As for which services are most likely to change, participant services were most cited as likely to be dropped, while fiduciary services were the most likely to be associated with a price increase.
And while the fiduciary regulation wasn’t a big impetus for change across the board (more than half said it wasn’t behind their changes), nearly a quarter (24%) said it was behind all their proposed changes, about 8% said it was behind most of them, and 12% said it was behind some of them.
Some comments from this week’s respondents:
- “We currently charge a flat fee for retirement plan services and sign on as a 3(21) fiduciary. We conduct group education meetings and then meet individually with participants who have specific questions or want investment selection recommendations. We will have to adjust the format of the individual meetings to comply with our Compliance Manual. If we need to invest in new technology to do so, this cost would be passed on to clients.”
- “Basically, I’m passing through to my clients the increased costs and expenses resulting from the DOL Rule. These costs include increased liability insurance coverage, and new software services we must purchase in order to ensure that we are fulfilling our fiduciary responsibilities as advisors.”
- “We have kept expanding standard services over the years and haven’t been smart about corresponding fee increases, so we're behind; will at least start new clients out at more realistic rates.”
- “If there is a change, it will be scaling back participant services; this makes me sad, because they need it most. It is still too early to tell how services will be delivered, and at what cost.”
Thanks to everyone who responded to this week’s NAPA Net Reader Poll!
Got a burning question you’d like to run by your peers? Looking to get an industry perspective on a specific issue? Post your question in the comments section below, or email me at [email protected].
