Could plans save by purchasing the same assets through collective investment trusts?
My friend Francis Vitagliano paid me a visit to show that 401 plans are paying mutual funds $940 million in transfer agent fees for services they already receive through their record-keeper.Defined-benefit plans use collective-investment-trust versions of mutual funds, which do not have transfer agent fees, are not regulated by the SEC and therefore involve less disclosure, and can be a much cheaper way to access the same investments. Some large 401 plans are moving in that direction.
Why so much? Are transfer agent fees, as my friend Francis suggests, really a big deal? Also, what’s the difference between transfer agents for mutual funds and record-keepers for 401 plans?Transfer agent tasks for individual investors at mutual funds involve functions No. 1 and No. 2 above, maintaining the account and calculating the daily balance. Since 401 plans have one omnibus account at each mutual-fund company, the transfer agent performs functions No. 1 and No.
Applying 5 basis points to the $4 trillion in mutual fund assets suggests an annual cost of $2 billion, higher than Francis’s number.
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