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.