Webinar Q&A: Monitoring your Vendor

Last Updated: November 27, 2012

After our recent Educational Series webinar on Monitoring your Vendor, Chris Thixton, Director, Vendor Services, responded to questions. See what he had to say below. Additionally, if you missed the live webinar, you can watch the recorded webinar here. Question:  Chris, the first question I want to get to today is about this terminology called bundled and unbundled. Is there a difference in how you monitor businesses that offer bundled vs. unbundled packages? Chris:  No, you do it the same way. If a vendor says the services are bundled, unbundled, packaged or whatever, you’re still going to want to focus on the core functions when you monitor and do an evaluation. Focusing on core functions as opposed to this “bundled vs. unbundled” terminology will allow you to have parity. Question:  Another question that we have is that you mentioned you don’t believe there’s a best method for calculating fees, whether it’s fixed, per head, or asset based. Why not? Why is there no best method?
Chris:  The vendor is going to determine what they want to make. They also know they have to position their price in the marketplace. They could set their asset based price lower than their per head price if they determine assets will increase while the participant count remains static. They determine they can make a little less in year one, but a little more in year four. Or, it may be that in three years they will want to have made a certain amount, so they’ll make the asset base lower than their current head fee. I really focus on what the total cost is after putting it all together. And, somebody in the past asked, “Well, what about the total cost in three or four years?” In three or four years, you’re going to be reviewing and evaluating fees again. You should consistently be reviewing fees so that you are always in a position to know whether or not they are reasonable.  Question:  You mentioned that there is more than one classification of fees to review. Can you give us an example of this? Chris:  Yes, I can tie it into what we just addressed. With general product fees, what are the core services going to cost for one year? If you are going to change vendors, conversion fees should be a separate classification. One vendor may have an actual conversion cost, but another one might not. Why is that? Sometimes conversion fees are rolled into the annual general product fees. Incidentals are another classification of fees—like your loans or distributions, special mailings, changing out an investment and benefit calculations. Education, which we just talked about, could be another classification of the fee. What I suggest is to get down to what the general product fees are, and make sure all the core functions are in there. After general product fees are accounted for, then you can determine other fees separately.


Pension Consultants, Inc.



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