Defined Contribution Consulting

Wurts & Associates has extensive experience in all aspects of defined contribution plan management including the selection of an administrative service provider, investment selection, expense management, employee education, and the ongoing evaluation of investment options. Our firm has been providing these services to defined contribution plans since its inception in 1986.

Wurts & Associates works with the fund sponsor to evaluate the unique aspects of the defined contribution plan, such as the employee demographics, existing education initiatives, investment fund options, and plan design.

Our professionals will then help the fund sponsor address the key issues such as: participant education; investment fund structure; and expense management.

Participant education

Participant education is one of the most important parts of any participant-directed defined contribution investment program. Wurts & Associates helps clients determine the most effective education and communication strategy for their participants. This may include utilizing a number of media, from written materials mailed to participants, educational meetings, videos, or interactive Internet based education. Wurts & Associates has experience in dealing with a wide range of educational issues including the initial education and enrollment process, the introduction of a mutual fund window or self-directed brokerage option, and the implementation of a third-party investment advice provider. Since participant education is an ongoing process, Wurts & Associates monitors the impact of the education program to ensure that it is achieving the desired result.

Investment Fund Structure

One of the big questions facing plan sponsors today is whether to utilize a bundled provider, pursue a non-bundled approach or adopt a semi-bundled or hybrid solution. Wurts & Associates has the ability to evaluate the advantages and disadvantages of the various fund structures, giving specific consideration to the unique attributes of the client - fund size, number of participants, geographic dispersion, cash flows, etc. The analysis focuses on the most cost effective structure, while giving consideration to the administrative aspects and functionality as it pertains to the participant.

In the case of an unbundled approach, Wurts & Associates assists the client with the selection of providers for the respective components: record-keeper, custodian, investment options, and participant education.

In assisting with bundled provider structures we simplify the complicated task of evaluating the true costs combined investment and record-keeping, which are sometimes complicated due to investment fees subsidizing the costs of administration.

In either case Wurts & Associates develops a request for proposal (RFP) tailored to the needs of each plan and then sends this RFP to a list of qualified firms. Once responses are received, the information is summarized and evaluated and compiled in a presentation book that analyzes the information both comparatively against the other provides and individually for each respondent. This analysis utilized to assist the client in choosing finalists to interview.

Expense Management

Expense management is one of the most important functions we perform on behalf of our clients, particularly in the case of bundled providers. The investment expenses are the most important consideration (regardless of the structure) because they typically represent the highest costs associated with a plan. Our professionals negotiate fees with the administrative service provider as well as with outside investment managers and have used a wide variety of tools to control costs such as the use of institutional mutual funds, separate accounts, commission recapture, and the recapture of administrative fees such as 12b-1 and sub-T/A fees.

In managing expenses for a plan, one tool at our disposal is the use of mutual funds with institutional share classes. This class of shares requires a significantly higher minimum investment and in exchange, provides identical fund management at a much lower expense ratio than the retail classes of shares.

The next avenue that can be explored for a plan is the use of separate account management instead of a mutual fund structure. Separately managed accounts have many distinct advantages over a pooled vehicle such as a mutual fund, including the ability to customize the portfolio to fit specific client needs. The most compelling benefit of a separately managed account is its fee savings relative to a mutual fund. These savings come from three primary areas. First, separate accounts employ a graduated fee structure in which the fees decline as the assets in the account grow. Second is the fact that the first step in the graduated fee schedule of most separate accounts is lower than the expense ratio on the publicly traded mutual fund. Thus, the client participants pay a lower fee regardless of the assets in the account. The savings will grow as the assets in the account increase. In addition, separate account fee schedules are negotiable and Wurts & Associates utilizes our position as a leading investment-consulting firm to negotiate advantageous fee arrangements on behalf of our clients. Finally, separate accounts can allow for the introduction of a commission recapture arrangement whereby a large portion of the commissions generated in the management of the account can be rebated back into the portfolio.