The ninth annual study by investment consultant NEPC shows a steady decline in record keeper fees among larger plans, heralding further industry consolidation. Overall fees as a percentage of assets dropped 1 BP, to 52 BPs. But the weighted average is now 49 BPs, down from 52 BPs in 2013. Meanwhile, median record keeping fees dropped to 70 BPs — a decrease of 12.5% in just one year.
Among the study’s 113 plans with 1.4 million participants, 85% used some form of revenue sharing — 29% used a fixed fee formula, but only 30% had no form of revenue sharing. Other highlights from the NEPC 2014 study:
- 96% offer TDFs, with the other 4% using lifestyle.
- There was no change in the average number of investments at 22.
- The percentage of plans using managed accounts jumped from 16% to 24%.
- The percentage of companies offering auto-enrollment increased from 51% to 53%, but the deferral rate dropped from 3.7% to 3.5%.
There’s no doubt that greater scrutiny by more experienced advisors and consultants, as well as increased sophistication by plan sponsors, will help to continue the decline in fees. Fueled by strong markets, increased assets also lead to lower fees, as will the shift to less expensive passive investments. Lawsuits and more regulations and regulatory oversight also contribute.
The movement toward lower fees is affecting all sectors of the market. That includes advisory fees, which is difficult because advisory services are harder to scale than are record keeping or money management. Expect consolidation for all service providers to accelerate.
