Rothschild is a high value and low cost partner to our clients. Our service model is unique. We utilize highly credentialed consultants with both financial and legal backgrounds as opposed to the typical investment firm which only utilizes advisors with financial backgrounds. This distinguishing characteristic allows us to guide our clients through the many legal and operational landmines that other advisors ignore. We focus on process, documentation, and implementation. This includes in-depth benchmarking of all aspects of your retirement program, not just fees and funds. Our process gives employers and fiduciaries a clear understanding of the program and greater peace of mind that the company is complying with ERISA requirements. With the right fiduciary process in place, we deliver impactful education and advice to your overwhelmed employees with nowhere else to turn.
Rothschild’s Five Pillars for Pursuing Retirement Plan Excellence
The fee analysis may include:
- Identification and summary of all parties compensated from trust assets plus the amount (and schedule) of their compensation.
- Analysis of the fees’ reasonableness given the size of the plan, current market conditions, level of rendered services, and appropriate benchmarks.
- Strategies to help committees better understand how the plan’s fees and revenue assumptions compare to other plans with similar asset levels and participant counts.
- Efforts that enable employers to obtain a fee arrangement that is consistent with industry best practices.
- A comparison of current legal and audit fees with appropriate benchmarks to determine whether current costs are consistent with industry standards.
Rothschild translates the key criteria of the IPS into 10 data points. Then, third-party reports are generated which grade a fund’s performance pursuant to the terms outlined in the IPS. These factors may include:
- Manager tenure and organizational stability: Rothschild believes that it is critical to maintain continuity of the individuals responsible for the organization’s historical success. We look for management teams that have been in place for five years or more.
- Absolute investment results: Ultimately, participants and committees look at how the investment alternative performed. We compare the investment option to peer group and benchmark on rolling one, three, and five year metrics.
- Risk-adjusted returns: In our experience, many participants and committees fail to consider risk-adjusted performance adequately. Risk-adjusted performance metrics demonstrate how well the investment options are performing relative to the risk of the fund. We look at factors such as Alpha, Beta, Sharpe Ratio, and Volatility.
- Low management and transactional fees: Low overall fees can help participants achieve success. While most Plan sponsors understand the impact of investment management fees, many neglect to review the trading costs associated with the mutual fund’s total expenses.
- Rothschild also considers qualitative factors that impact performance. These factors are not easily measurable but critical to consider, and may include:
- The fund manager’s compensation arrangement: Rothschild prefers money management organizations that calculate compensation based on longer-term investment results. Many organizations take a short-term approach to compensating their fund managers. Compensation packages determined on a year-by-year basis may lead to investment decisions that are not in the best interests of long-term shareholders.
- Private ownership: Investment organizations that are public tend to have competing interests from their shareholders and their clients. Rothschild believes that minimizing the potential for conflicts of interest can lead to better corporate governance and investment outcomes.
- Significant investment in research: Successful investment organizations tend to have experienced and highly-credentialed research teams.
Additionally, Rothschild can:
- When necessary, conduct due diligence on current investment managers’ compliance with the stated criteria outlined in the IPS.
- Assist with designing overall structure of investment offerings including: core menu alternatives, stable value fund versus money market, self-directed brokerage account or mutual fund window and lifetime income options, and collective trusts.
- When necessary, review the process to select the qualified default investment alternatives (“QDIA”) and the rules for placing participants in the appropriate QDIA.
- If applicable, define the client’s objectives concerning company stock, including the rules/issues associated with company stock.
- If requested, perform due diligence on current investment managers and conduct searches for alternative investment managers consistent with the process identified in the Plan’s Investment Policy Statement. When necessary, draft memos for: the retirement plan fiduciary file which documents the underlying rationale for investment manager changes, the alternative managers that were under consideration, and the motivating rationale for finalist selection.
Examples of Rothschild’s fiduciary assistance include:
- When appropriate, defining, documenting, and acknowledging the roles and responsibilities of all involved parties (fiduciaries and non-fiduciaries).
- When necessary, assisting fiduciaries in making all parties aware of their duties and responsibilities and acknowledging this status in writing.
- If requested, creating and helping the Investment Committee follow a defined set of by-laws.
- Drafting an Investment Policy Statement (IPS) for the plan and amending the IPS as necessary.
- Aiding the fiduciaries in managing the investment portfolio in accordance with applicable best practices and written IPS parameters.
- Providing on-site consulting during Committee meetings.
- When necessary, regularly reviewing agreements and contracts to ensure consistency with the needs of the plan.
- When necessary, examining whether any parties have conflicts of interests or may cause the plan to engage in non-exempt prohibited transactions.
- As requested, helping the Committee establish guidelines for a periodic review of the organization’s effectiveness in meeting its fiduciary responsibilities.
Rothschild follows a comprehensive model for servicing and educating employees about their 401(k) plan and their overall retirement readiness. We recognize that effective employee education is critical to the success of a retirement plan. Rothschild has tools available to assist participants in adopting the proper risk level and asset allocation portfolio strategy. These tools are designed to simplify the investment process and provide employees with a disciplined investment approach.
Our education capabilities have three components:
- Onsite group meetings
Group presentations are usually 20-30 minutes and cover a variety of topics (listed below). Group presentations allow us to introduce team members and to discuss savings strategies while building participant rapport. In general, group presentations have two goals: educate and encourage individual meetings.
- One-on-one individual education and guidance meetings
Each retirement plan participant can meet with us individually. These meetings can be scheduled in conjunction with the group meeting or ad hoc. Participants are welcome to bring any financial statements they deem appropriate. We encourage participants to consider all aspects of their financial future. These meetings are tremendously effective in helping participants take actionable steps to improve their retirement future.
- Print materials on various industry topics
Periodically, we draft educational materials on relevant topics.
Rothschild has tools available to assist participants in adopting the proper risk level and asset allocation portfolio strategy. These tools are designed to simplify the investment process and provide employees with a disciplined investment approach.
These tools may include:
- Personal Investment Policy Statements
- Participant education seminars—group presentations allow us to introduce team members and to discuss savings strategies while building trust and confidence with participants.
- Investment Advisor accessibility for individual consultations—these meetings allow us to learn participant’s goals and objectives for their retirement plan, and offer personalized guidance and education. Any personal concerns or needs for additional clarification are addressed here.
- Predetermined asset allocation models based on age and level of lifestyle
- Risk/reward education pieces
- Retirement planning workshops
- Retirement planning software
Our service model is innovative, flexible, and includes:
- Review of the corporate contribution to the plan to ensure the company is maximizing the value of their commitment to the employees and the plan.
- Careful consideration of the various design features which can often increase participant deferral percentages, heighten enrollment, and decrease overall administrative costs.
- Assisting the plan to utilize special exemptions, minimize future audits, and administrative fees.
- Assessing the potential benefits of adopting a Roth feature, ensuring that the plan operates within safe-harbor guidelines, considering the fit of automatic increases as a default feature, and confirming that the designated QDIAs are appropriate.