Employee Fiduciary’s Latest Study Reveals How Fiduciary Advice Reduces 401(k) Plan Costs

MOBILE, Ala., May 28, 2024 /PRNewswire/ — Employee Fiduciary, LLC, a leading provider of 401(k) recordkeeping and Third-Party Administration (TPA) services, has released its latest 401(k) advisor fee study. The study highlights how fiduciary-grade investment advice can lower the cost of small business 401(k) plans, making retirement more affordable for plan participants.

The study comes at a crucial time, following the recent U.S. Department of Labor’s (DOL) release of the Retirement Security Rule. This rule redefines the term “investment advice fiduciary” under ERISA, expanding the circumstances in which financial professionals must provide impartial investment advice that prioritizes the interests of retirement investors. Effective September 23, 2024, the new rule closes loopholes that previously allowed financial professionals to prioritize profit over impartial advice in certain situations.

“We fully support the new rule,” says Eric Droblyen, President and CEO of Employee Fiduciary. “Our study demonstrates that fiduciary-grade investment advice lowers the total cost of 401(k) plans, resulting in higher returns for participants and more savings to compound until retirement.”

Key Findings from the Study Include:

  • Fees Charged by Fiduciary Advisors: The study analyzed fees from 1,109 fiduciary-grade financial advisors, finding that fees decrease as plan assets increase. Smaller plans (assets $0$500k) pay an average of 0.69%, mid-sized plans ($500k$1M) pay 0.64%, and larger plans ($1M$5M) pay 0.47%.
  • Total Plan Fees: When advisor fees are combined with Employee Fiduciary’s plan administration fees, total plan fees are lower than national averages. For example, plans with average assets of $189,367.06 incur total fees of 1.63% of assets, compared to the national average of 1.71% for larger plans with $500,000 in assets.
  • Impact of Fiduciary-Grade Advice: Fiduciary-grade advice is crucial for reducing costs and enhancing retirement outcomes. Advisors who follow fiduciary standards recommend investments with reasonable fees, leading to additional savings through reduced investment expenses.

Droblyen adds, “When 401(k) fees are deducted from participant accounts, they reduce returns dollar-for-dollar, leading to less savings to compound until retirement. This cumulative effect of 401(k) fees can cost a worker hundreds of thousands of dollars in retirement. The Retirement Security Rule should blunt these losses by subjecting all retirement advice to ERISA’s rigorous fiduciary standards.”

For a detailed analysis of the 401(k) advisor fee study, visit www.employeefiduciary.com/blog/401k-advisor-fee-study.

About Employee Fiduciary

Founded in 2004 and headquartered in Mobile, AL, Employee Fiduciary, LLC is a leading provider of low-cost 401(k) plans for small to medium-sized businesses. The company’s founding principles are transparent fees, personal care, and expert plan design. Serving over 5,000 small businesses and approximately 150,000 participants nationwide, Employee Fiduciary is committed to helping employers provide affordable and effective retirement plans for their employees.

For more information about Employee Fiduciary, visit www.employeefiduciary.com, and follow us on FacebookX, and LinkedIn.

For Additional Information
Victoria Power
Employee Fiduciary

(251) 254-9634

SOURCE Employee Fiduciary