Monitoring client and investment fees

The fifth Global Fiduciary Precept is to control and account for all investment expenses. It is a fundamental duty of a fiduciary to ensure that all forms of compensation are reasonable for the services being rendered. As such, it is important that fees are evaluated as part of selection, benchmarked against similar options, and regularly monitored to ensure they continue to be reasonable given the alternatives available and as circumstances change.

Yesterday, Mike and Rich presented a webinar that went over why fees and expenses need to be monitored closely; the scrutiny fee transparency is currently receiving from the various lawmakers, rulemakers, media and investors; and the three main fee areas to look at when evaluating investments: client-level fees, operational fees, and shareholder fees.

The recording of the session and slides can both be found on the webinars page of our website. In addition to what is available as part of the recording, we also wanted to highlight some additional reading and materials that were mentioned throughout the webinar as good resources for monitoring fees:

• Practice SA-4.4 from the Prudent Practices for Investment Stewards handbook
• Practice SA-4.5 from the Prudent Practices for Investment Stewards handbook
• The American Jobs and Closing Tax Loopholes Act, which is the House bill currently in the works that will include a fee transparency provision.
• An update on DOL activities from Reish & Reicher, including 408(b)(2) fee disclosure rules expected later this year.
• Information on important, recent fee-related lawsuits:
  • Hecker v. Deere
  • Braden v. Wal-Mart Stores, Inc.
  • Martin v. Caterpillar, Inc.
  • Jones v. Harris
• Reporting and benchmarking tools available from:
  • fi360 Toolkits (the Fee & Expense Report was specifically mentioned in the webinar)
  • Fiduciary Benchmarks
  • Investment Company Institute's Factbook (free resource)
  • Brightscope
  • Ann Schleck & Co.'s Fee Benchmarker

UPDATE: RegisteredRep was in attendance and wrote a nice story about our webinar. Read it here.
  

Comments

[Don Davidson]

Where I'm really seeing fees being a huge issue is in the small plan market. I think too often the plan sponsors assume they're getting a good deal but because the fees are not always transparent the amount of bps a small company is paying can be insane.