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With all the new fee disclosure rules and regulations it also brings to the forefront the broker fees. Is there anything we can use to measure the fees we pay to the broker against other brokers?

May 11, 2012 by Sandy from Lincoln, NE in  |  Flag
6 Answers  |  8 Followers
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16 votes
George Cones, JD Level 20

Good question. This is not legal advice, so if you have legal questions seek out an ERISA attorney.

To begin to understand plan costs and service quality, you should begin here on BrightScope. Look at a few plans, enter your plans information, and see how you stack up.

You can find a great study which focuses on “all in” plan cost at the following website:


In addition, James P. Dowd, CFA, who is contributor to this site has offered a benchmark study to other questioners, which I am sure he would provide if you get in touch with him.

Sandy, from you question, I assume you are a trustee or administrator of a 401(k) plan or 403(b) plan.

In order to learn how to protect yourself in your role as a fiduciary , it it is important to understand that there are different types of fiduciaries under ERISA. There are Administrators and Trustees Section 402(a)(2) fiduciaries, Section 3(38) Investment Advisor Fiduciaries, and Section 3(21)(A) functional fiduciaries, such as a person or entity that:

  –  has discretion or control over plan assets
  – renders investment advice for a fee
  – has discretion over plan administration

Please seek to establish in writing what the service provider’s fiduciary responsibilities are.

Under the new 408(b)(2) regulations you will have a duty to ferret out all of the costs and potential conflicts of interest. The final regulations create potential liability for Covered Services Providers (CSPs) and Responsible Plan Fiduciaries (RPFs).

These regulations were implemented because many participants and plan sponsors (employers) have no idea how much they are paying for services.

There are several layers of fees on relating to the investments, such as:

•   Sub TA Fees (sub transfer agent fees)
 •  12(b)(1) Fees
 •  Load Fees (Front-end and Back-End)
 •  Expense Ratios:  Mutual Fund and Exchange Traded Fund (ETF) Internal Management Expenses 
 •  Redemption Fees
 •  Exchange Fees
 •  Account Fees
 •  Soft-Dollars – 28(e) Safe-Harbor
 •  Unitized Variable Annuity Wrap Fees

Some of these fees are easier to find than others.

One place to begin is to look at the share classes in the plan. Get the prospectus for each plan choice. There you will find the various share classes. If you are using the institutional share class, great, if not see what the difference in costs is and ask questions, about load fees, contingent deferred sales charges, redemption fees, 12(b)(1) fees and Sub-TA fees.

A more detailed discussion of share classes can be found om my BrightScope page at:


Another level of fees, relating to investments are custodial fees, transaction fees, and any number of account fees. You may have to ask a lot of questions to understand the fees and expenses. Remember you are the client, and they have a duty to provide you with the information.

It would be wise to document any attempt to get information from your service providers and their responses to your requests, since you may be held accountable for their failure to provide the information later.

Comment   |  Flag   |  May 11, 2012 from Wilmington, DE

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8 votes

Sandy- that is a great question. Evan's answer was good, short and concise. George provided a very in depth overview of what the various fees are comprised of and where they are found. We too use Brightscope and Judy Diamond as a base platform to identify what brokers are being paid, however, these two services do not do any comparative analysis. Two services we use in helping our current Trustees and Plan Sponsors, as well as prospecitve clients, understand Broker Fees, with comparative analysis. are Fidcuciary Benchmarks and Ann Schlect. As an Advisor we provide these services for our clients. With F.B. we can detail all plan fees and compare to other similar plans by industry, plan asset size. demographics etc., including Broker Fees. In addition, with A.S. we can do comparative analysis exclusively on Broker Fee and Advisor compensation relative to services provided based on plan size, demographics, etc. I suggest you work with an Advisor that has these services available that you can engage and consult with. Feel free to call for further details at 310-530-5525. Dan

Comment   |  Flag   |  May 11, 2012 from Torrance, CA

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Hi Sandy: Brightscope and Judy Diamond (among others) provide National Data on 401-k Plans that includes Fee information. But actually shopping your plan to 2 or 3 providers - and receiving proposals with detailed fee breakdown - is the most hands and accurate on way to do it. It will also give you a sense of where the Market is relative to the specifics of your group. Please let me know if you have any questions. Best, Evan (516-240-6161)

Comment   |  Flag   |  May 11, 2012 from Port Washington, NY

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Hi Sandy: Brightscope is a great resource. We also offer our clients a free benchmarking service that will show you how the plan compares to other plans. However it is important to remember that although fees are very important, investment choices, participant education, and service are also important to consider.

Comment   |  Flag   |  May 11, 2012 from St Charles, IL

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Allan Henriques Level 18

The Department of Labor’s new fee disclosure rules should make it easier to understand the broker fees that you’re paying. Once you get a clear fee breakdown from your current broker [which they’ll be required to provide once the 403(b)(2) regulations take effect July 1], you’ll have a clear idea of what you’re paying. Then, you can use services like Brightscope to compare those fees to the fees other brokers charge. You can also shop around and get quotes from other brokers to see how they compare to what you’re getting right now.

Comment   |  Flag   |  May 21, 2012 from Rocklin, CA

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Hi Sandy, Just to build on John's answer; one of the reasons I like Fiduciary Benchmarks is that the information is from `live data' - In other words, you'll see what plans are actually paying; something that's good to know going into a provider search (RFP). RFPs will be bids - estimates - which are good to have; but, it's not live data. Hope this helps.

Comment   |  Flag   |  May 11, 2012 from Moorpark, CA

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