Why a Purposeful SP Retirement Plan is
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Our plans are built on conflict-free advice, expert regulatory and tax compliance, the protection of a third-party custodian, and the opportunity to delegate company fiduciary responsibilities.
Paying an advisory fee to your current plan provider?
You may be getting an advisor who represents the broker-dealer or insurance company rather than your company. Our legal obligation is to our clients. And we don’t have the conflict of interest inherent in an advisor who works for a broker/dealer or insurance company, because we are independent of the custodian and recordkeeper.
Although the basics are the same between 401(k) providers, there are important differences in the benefits and protections our clients receive compared to other providers.
A FIDUCIARY & FEE-ONLY ADVISOR
As a Registered Investment Advisor, I am required to serve my clients' interests first. And I don’t accept commissions or other kickbacks from the investments in your plan. This protects both your employees and your company.
You may also delegate much of your fiduciary obligations to us, reducing the liability exposure to your company.
AN EXPERT ADMINISTRATOR AND RECORDKEEPER
Your plan administration, tax filings, & regulatory compliance are provided by our partner, Professional Capital Services.
Founded in 2001 by tax and ERISA attorneys who saw the need for a conflict-free, full fee disclosure, no hidden agenda retirement solution; PCS is a leader in retirement plan administration and recordkeeping.
A PROVEN AND STRONG CUSTODIAN
Your plan’s assets are held either at Charles Schwab or TD Ameritrade. Neither Purposeful SP nor PCS have access to plan money.
Using a third-party custodian also means there are additional checks and balances to ensure plan money is secure, further protecting your plan and reducing company liability.
Is your 401(k) provider getting paid on the back-end
through commissions, sales loads, and other kickbacks?
Transparent Fees & fewer conflicts of interest
Lower Your Fees
Purposeful SP 401(k) plans are built on full and transparent fee disclosure without the conflicts of interest that come from accepting commissions or other kickbacks. Our plans’ fees are designed to start as a low percentage of the plan assets, which reduces as the plan grows.
To eliminate any incentive to choose investments or providers that could increase your fees, we don’t accept compensation from the investments, the custodian, nor the administrator of the plan. To further eliminate conflicts of interest, any sales loads, 12b-1 fees, or other investment compensation received by PCS is immediately credited to your account to lower the cost of the plan.
Why Lower Fees are Important
Aside from the obvious benefit of saving your company money, lower fees also increase the retirement benefit to your employees and reduce the likelihood your company will be sued over the plan.
While a fee difference of 1% may seem insignificant, the higher fee can have a dramatic impact on employee retirement balances when they retire. As an example: assume the employee (including employer match) contributes $500 per month to their 401(k) and the plan earns a 9% average return over 35 years. With a 1% fee for the employees, the employee would have $1.15 million in their account at retirement. But if the plan charges a 2% fee to the employee, their account balance drops by a quarter million dollars.
This significant impact is one of the many reasons 401(k) lawsuits are on the rise. And sadly, many of the biggest 401(k) providers in the country are being sued by their own companies because of the high fees they charge in their retirement plans. Even as your adviser is telling you how great their company’s 401(k) offering is, they may be suing their employer over high fees in the same 401(k) offering.
Why Your Fees are Likely Higher
Retirement plans have often been a cash cow for the national companies that provide them. Conflicts of interest abound when the advisor on the plan is an employee of the same company that custodies the assets, provides the investment options, and acts as the recordkeeper and administrator of your plan.
While all-in-one shopping might seem convenient, the lack of checks and balances allows for profits to be buried throughout the retirement plan in the form of investment expense ratios, sales loads, 12b-1 fees, commissions and other hidden compensation.
Not only do supposed advisers on plans often charge fees well in excess of what a financial advisor typically charges, the advisors also tend to recommend their company’s mutual funds, annuities, and ETFs in the plan’s investment choices. And advisers often earn bonuses for increasing the profitability their employer earns off your plan.
Additional RESOURCES & ARTICLES
401(k) Lawsuits: What are the Causes and Consequences? - by Boston College Center for Retirement Research
Meeting Your Fiduciary Responsibilities - by the U.S. Department of Labor
What You Should Know About Recent Trends in 401(k) Fee Litigation - by ERISA attorneys for BankDirector.com
Did you know your company and the owners
may be personally liable for the 401(k) plan?
Delegate Fiduciary Obligations to
Reduce Your Liability
Purposeful SP retirement plans can be structured to transfer much of the fiduciary liability away from your company.
As the sponsor of a retirement plan, your company has a fiduciary responsibility (and liability) to protect the assets of the plan for the benefit of employees. This means your company and the owners can be sued and held legally liable for problems with your retirement plan.
DELEGATION of Fiduciary Obligations under Erisa 3(38) + 3(16)
With Purposeful SP 401k plans, we act as the fiduciary on the plan. Your company delegates authority to us in writing to make discretionary decisions on the investment options within the plan.
In addition, your company may also delegate the administrative functions of the plan to PCS. This includes the regulatory compliance, tax filings, and notifications required by law.
This delegation shifts your company’s role from being an investment and legal expert to acting as a manager who monitors the investment and legal experts, which greatly reduces your liability for the plan.
Most Providers offer NO DELEGATION or just 3(21) Delegation
Typically, the plan sponsor (your company) legally makes the investment choices for the plan, functions as a prudent investment expert, and ensures regulatory compliance. This means your company retains full liability for any potential problems even when you have an adviser on the plan.
The reason for this is most plan advisers are actually legally sales representatives of their company, and therefore cannot take on a fiduciary role. Plan providers often offer a menu of proprietary insurance or mutual fund products, and may offer recommendations (not advice) from a non-fiduciary advisor, but your company is still fully liable. Many companies believe they have delegated their fiduciary responsibility to an outside company but in reality have not.
In addition to offering your company fiduciary advice, Purposeful SP offers Financial Wellness Programming for your employees as part of our 401(k) service. Employees receive financial education around the company 401(k), retirement planning, managing student debt, and more.
Joshua D. Escalante Troesh, MBA
Fiduciary Financial Planner
Ranked #1 Nationally on Investopedia’s Advisor Insights*
Tenured Professor of Business
Passed the rigorous Certified Financial Planner (CFP) Exam
Quoted regularly including in Forbes, U.S. News & World Report, and other media