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401(k) Wire
April 11, 2005
Inside the Mind of a Cost Cutter
Brent
Glading, executive vice president and founder of the
Glading Group, has made a name for himself in the
industry by helping plan sponsors lower
fees
.
Glading
is hardly the only one out there doing so. Many plan
consultants are following his lead or emphasizing
something which they, too, have offered but not
highlighted
.
With
more scrutiny on plan fees from regulators, sponsors and
perhaps even participants, providers need to know what
exactly consultants are looking for
.
According
to Glading, the key to his firm's approach is to lower a
plan's costs without changing the plan's fund lineup.
This is in contrast to the investment community's
approach of lowering plan costs by changing a plan's
investment options
.
Glading
typically starts by building a model from the ground up.
The firm estimates how much it costs a provider to serve
a sponsor, said Glading: "we'll tell them what we think
they can do." The firm creates its estimates based on a
plan's complexity and the personal industry experience
of the Glading Group principals
.
For
the most part, Glading is not having a difficult time
finding out the information they need from providers.
"We tend to get the information we want … we've
established a good reputation from the service provider
community, including CitiStreet, Merrill Lynch, Dreyfus,
Prudential, MassMutual, Oppenheimer … pretty much all
across the board," said Glading
.
But,
as can be expected, incumbent providers are less likely
to volunteer information. "New providers are much more
willing to create compromises … as long as they're still
making a profit," said Glading
.
"There's
only a few vendors out there that are being standoffish
about disclosure," agreed Michael Francis of Francis
Investment Counsel. But that providers are willing to
share their revenue is just "half of the due diligence
process," said Glading. The real information
is the cost side of the equation – information that
providers tend to be typically less forthright
about
.
One
area where it remains difficult for sponsors to cut
through the red-tape is in the small plan market. "The
smaller market is what's really going to take some time
to penetrate … because the efficiencies are not there,"
said Shawn Ecklund, a managing director at Glencrest
Financial Advisors
Glading
cites the collective industry experience of himself and
his partners as one of the reasons of the firm's
success. Glading's partners include David B. Kimball and
Kenneth E. Williams. Kimball was previously at Principal Financial
Group, Bankers Trust Company, and Merrill Lynch.
Williams also comes from the retirement group at Merrill
Lynch, but most recently from Prudential Retirement. "My
partners and I worked for the service provider community
… and realized there was very little oversight and
access to cost structures and fee structures," said
Glading
.
Glading
himself headed institutional sales for MassMutual
Retirement Services and Oppenheimer Funds Retirement
Services. Glading was also a regional sales director at
Merrill Lynch and Dreyfus Group Retirement
Plans.
The
Glading Group is finding that sponsors are keen on
finding out their plan fees partly to help their
participants out, but also to protect themselves. While
many are still in the dark about plans and think their
plans are free, others are becoming more and more aware
of plan costs
.
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