A Fee Comparison form is also important for new clients to see, especially if you are trying to obtain a new client from the insurance agent or broker-dealer world. You do a side-by-side comparison, for example on 12b-1 fees, variable annuity commissions, mutual fund commissions, management & expense costs and other fees. Of course, it works both ways. If you outsource to money managers, then you will have to add their fees, your co-advisor fees and the ETF or mutual fund fees on top of that. The result is that your fees could be higher than a competitor, so it is another one of those business decisions. What can you do to keep your firm's fee low for Fee Comparison purposes? Perhaps, a flat fee per month might make your RIA firm stand out in the crowd on this Fee Comparison form. Something to think about.
Why do you need a Fee Comparison? Some states and ERISA want you to show why moving money out of a 401k participant's account to an IRA Rollover is in the client's best interest. After all, being an RIA firm means that you are a Fiduciary. It is not in the client's best interest to move their account to your firm unless, it truly benefits them on both a Services and Fees basis. This is where the Services Comparison and the Fee Comparison forms, working together, show your reasoning as to why it was in a client's best interest to move that 401k participant account to an IRA at your firm.
Our Fee Comparison form is only one page. The client signs it along with the Services Comparison and you have documented why it was in their best interest to open an account at your firm.
We also have a Retirement Investor agreement. Retirement Investor is what ERISA calls qualfied retirement plan participants (401k). Sometimes, a client may come to you asking just for help with their 401k account. Perhaps, they are still working and cannot roll it over, but you do not want to give away your advice for free, so what do you do? Well today, there isn't gold in them thar hills, there is risk in them thar hills. As a fiduciary, you need to protect yourself with a Retirement Investor agreement that says that your advice is a one-time only situation for a flat fee. If you advise a 401k plan participant on their 401k plan, you assume fiduciary liability. Are you going to do this and not get paid? I hope not, because you are accepting risk for your firm if you do. Here again, is another one of those business decisions. Do you help people with 401k's who cannot roll them over? It is up to you, but we can help you with the Retirement Investor agreement if you want to go this route.