What's New?


New telephone System

Next week we are scheduled to implement a new telephone system, so if you have any difficulty getting through, please be persistent. The vendor assures us everything will go smoothly, but...

By Appointment Only

We are changing the walk-in policy at our office location here in Davis. We are all out "in the field" more and more, so we will receive visitors by appointment only.

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Retirement Plan Services

Sponsoring a qualified retirement plan can be a smart business decision. It's a great way to attract and retain key employees. But offering a retirement plan isn’t simply a matter of picking one off the shelf, like a toaster. There are many responsibilities and considerations to offering a plan, from cost to administration to fiduciary liability.

Plan or Product?

The financial services industry has found the qualified retirement plan market to be quite profitable, at the expense of plan sponsors and participants alike. By packaging investments and services, then selling these to plan sponsors as a product, they have created a reliable source of revenue for themselves. This packaged approach makes life easy for the firms and their salespeople, while making the plan more expensive for the plan sponsor and the participants.

In any plan, the expenses of the plan are paid through the investments, or drawn from the participant accounts. This makes it seem as if the plan has little cost to the employer. And it makes it easy to conceal the true cost of the plan. And easy to sell the product. Then, the fees are divided up between the various service providers: the plan advisor, the third party administrator, the record keeper, the trustee/custodian, the investment (mutual fund) companies, and the financial company bundling together the plan. For smaller plans of under $100 million, the fees can come to between 2 and 3 percent. This means that the participants with the largest balances in the plan are paying much more of the fee. If not questioned (and remedied) this not only costs more, it leaves the plan sponsor vulnerable to breach of fiduciary duty.

Pay to Play

The companies who bundle the plan together can also be receiving payment from the investment companies in order to include them in the plan. This is called “pay to play”.

A Better Way

There is a better way to approach offering a qualified retirement plan than offering a product from a sales organization.

Divide and Conquer

First, start by separating the service providers. At Navion Financial Advisors Retirement Plan Services, we un-bundle everything and much as possible. This way, we can find the best of each of the providers for each individual plan. Then, wherever possible, pay the providers with a check, not using plan assets. While this will create an expense for the company, it is tax deductible to the firm and no longer impacts the retirement of the plan participants. This also makes it completely transparent WHAT is being paid to WHOM, and for what service. The only expense remaining to be paid by the participants will be the direct, prorata cost of the investments themselves.

Select Better, Lower Cost Investments

At Navion, we use a screening process to find the plan investments that is completely open and transparent. Using the fi360® Fiduciary Score1, the process of selecting the investments is completely objective and meets fiduciary best practices. This also allows us to utilize lower cost investments not found in most traditional retirement plans, as the investments we use do not lend themselves to “pay to play”. This also helps the plan sponsor meet the fee disclosure requirements under IRS §408(b)(2). For more on fiduciary process, see our web page Services for Fiduciaries.

The Plan Sponsor’s Role as Fiduciary

A plan sponsor is a fiduciary under the Employee Retirement Income Security Act of 1974 (ERISA). They are required, among other things, to:

• act for the exclusive purpose of providing benefits and keeping plan expenses reasonable.

• perform his or her duties “with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in similar circumstances would use.”

• diversify their plan’s investment options in order to minimize the risk of investment losses.

• act in accordance with the terms of the plan document unless it is clearly a violation of ERISA to do so.

At Navion, we help our plan sponsor clients to meet these and their other obligations through a clear fiduciary process. A good process doesn’t guarantee good outcomes, but it can certainly mitigate poor outcomes.

Define the Service

Many plan sponsors report that they only see the person who sold them the plan when there are new participants to sign up, if at all.

At Navion, we take a different approach. Instead of a percentage of assets, which translates to a pay raise for the salesperson (even if they aren’t working any harder), we charge a flat fee for a defined level of service based on the needs of the plan. We then develop a written service schedule for when the services will be delivered. A professional fee for a professional service. What a concept! Some of the services we provide include:

•Plan Design and Review

•Statement of Investment Policy

•Investment Selection and Review

•Participant Education

•Participant Level Advice

•Fiduciary Consulting

In a Nutshell

If you offer an existing retirement plan for your employees, or would like to, and would like to control costs, offer an investment lineup selected by using a defined process, better meet your fiduciary obligations, and work with an advisory firm on a professional, not sales basis, call for a no obligation initial consultation.

1The Center for Fiduciary Studies is the standards-setting body for fi360 and is supported by a team of experienced investment practitioners, attorneys, educators, and other professionals. The Center for Fiduciary Studies develops and maintains the Prudent Practices defined in our handbooks and awards the Accredited Investment Fiduciary® (AIF®) and Accredited Investment Fiduciary Analyst® (AIFA®) professional designations. In addition, the Center is responsible for overseeing the body of knowledge that forms the basis for the AIF and AIFA curriculum, examination, and certifying qualifications.

Based on the work of the Center for Fiduciary Studies, fi360 offers the AIF and AIFA Designation Training programs and other fiduciary training programs. Fi360 also develops sophisticated fiduciary management online tools for investment professionals that provide more efficient and effective implementation of the Prudent Practices. In addition to training, designations, and tools, fi360 offers a host of fiduciary resources including a blog, webinars, annual conference, and public advocacy for laws that promote greater transparency and accountability in the investment industry.