Mesirow Financial vs. Mesirow Financial

Mesirow Financial has two different areas that provide services to group retirement plans:  The Retirement Plan Advisory Group and the Investment Strategies Team.   Here is more information:

There is a significant overlap of services at the plan sponsor level, including:

1.  Developing an investment policy statement.

2.  Providing fiduciary services.

3.  Performing ongoing due diligence of investment managers.

4.  Creating a diversified investment menu.

These areas are completely separate and do not interact with each other, but it would be helpful if they did.  For example, clients can obtain 3(21) or 3(38) fiduciary services (which include the other additional services listed above) on Vanguard’s platform through Mesirow Financial’s Investment Strategies team for a total cost of 3 and 6 basis points for ERISA 3(21) and 3(38) fiduciary services respectively (2 to 5 basis points for Mesirow and 1 basis point for Ascensus who partners with Vanguard) with no required minimum asset level.

One difference between Mesirow Financial’s 3(21) and 3(38) fiduciary services is that while the responsibility for the selection and monitoring of plan assets remains with the plan sponsor with Mesirow’s 3(21) services, Mesirow takes discretionary control over the selection and monitoring of the plan assets with their 3(38) fiduciary services which would save time for both the advisor and plan sponsor.  However, if the advisor is recommending a line-up consisting of passively managed funds, there should be little time spent on the selection and monitoring of plan assets anyway.  Another difference is that there are not only far more funds available with Mesirow’s 3(21) services, but the plan sponsor also has the flexibility to add and remove whatever funds it wants within Mesirow’s broader offering of hundreds of funds, while the plan sponsor would not have this flexibility with Mesirow’s 3(38) services.  Furthermore,  the legal protection is identical for both 3(21) and 3(38) services, so there isn’t much of an advantage of paying any more than 3 basis points for this type of fiduciary service.  Because this team provides such extensive and cost-efficient services, it would seem there is no need for an outside advisor, but they do not provide participant education services, so there is room for an advisor to the extent that plan sponsors need this type of service.

Consequently, plan sponsors should consider how much of an advisor’s fee is for fiduciary and investment selection and monitoring services vs. participant educational services.  Typically, advisors don’t break down what their fee is for, but if plan sponsors are primarily using an advisor to select and monitor investments rather than for participant education services, they should seriously consider either significantly lowering the advisor’s fee or not having this type of advisor at all and simply using Mesirow’s low cost Investment Strategies Team.

In further reference to what an advisor’s fee should be and how it should be charged, it really depends on what type of services the advisor is providing.  If advisors are charging for participant educational services, then they should only act as a registered investment advisor rather than a broker and charge a flat fee based on how much actual work they are doing rather than an asset-based fee.  I have elaborated here and here.

Granted, Mesirow’s Investment Strategies Team does charge asset-based fees, but my criticism of this type of fee arrangement has been largely on the basis that fees should only increase in proportion to the increased liability an advisor faces – and a fee of only 3 to 6 basis points is far more proportional to the cost of increased liability than an asset-based fee of 25 basis points or more which is what most advisors and brokers typically charge.  The other problem with asset-based fees is that it causes a conflict of interest when advisors give advice to participants (technically a broker can’t even legally provide advice), but as noted above, Mesirow’s Investment Strategies Team does not provide advice to participants, so this conflict would not apply.

It has been my experience as a financial advisor providing services to group retirement plans that participants hardly ever contact the advisor or broker and/or the plan sponsor is simply too busy to spend much time having participant educational meetings.  Furthermore, once participants are set up in a risk-based model or target date fund, there should be little if any changes made to the funds, especially in the short term.

Advisors may argue, however, that they do more than simply provide investment due diligence and participant educational services.  They also claim to provide valuable fee benchmarking studies to provide plan sponsors with assurance that their fees are “in-line” with so called industry averages.  Because most plans pass on asset-based fees (including record keeping, custodial, and sometimes even administration) to participants, their costs are not commensurate with the level of services provided either, which makes a comparison to other plans misleading and meaningless.  For this reason, there is little need for benchmarking services.  All plan sponsors need to do order to ensure their fees are reasonable is offer a line-up of passively managed funds and use a provider who charges flat dollar fees regardless of the plan asset level for advisory, record keeping, and administration services that are commensurate with the level of work and risk involved – and there are many firms who do charge this way without necessarily sacrificing their service offering as I have explained here.

Mesirow’s Investment Strategies team can be used by any financial advisor and should be viewed as an additional resource that can be utilized to provide services more efficiently than financial advisors can provide on their own.  However, advisors whose business models are not competitive may view this kind of service more as a threat than as a resource as it will shine light on the inefficiencies of their services.  Consequently, plan sponsors and participants need to make more of an effort to understand how the group retirement plan industry works rather than simply rely on service providers.  Unfortunately, this isn’t going to change any time soon as participant level fees dominate the industry, so plan sponsors will always view the retirement plan as a low priority because it does not affect the bottom line and most participants lack the financial expertise to even know what to ask, which causes them to primarily do nothing, as suggested by Mesirow’s own survey:

“Participant interest in fee disclosure, however, is surprisingly low, with more than 83% of plan sponsors indicating that employees have had very few questions as a result of 404(a) participant fee notification.”

Participant interest in fee disclosure, however, is surprisingly low, with more than 83% of plan sponsors indicating that employees have had very few questions as a result of 404(a) participant fee notification – See more at:
Participant interest in fee disclosure, however, is surprisingly low, with more than 83% of plan sponsors indicating that employees have had very few questions as a result of 404(a) participant fee notification – See more at:

Participant interest in fee disclosure, however, is surprisingly low, with more than 83% of plan sponsors indicating that employees have had very few questions as a result of 404(a) participant fee notification – See more at:

Risk-Based Asset Allocation Models
Our risk based asset allocation models are designed to help our clients manage risk and maximize return by diversifying across a comprehensive set of asset classes.

Fiduciary Partnership
The Mesirow Financial Fiduciary Partnership service can help to make your plan sponsors’ fiduciary duty more manageable.

Custom Target-Date Portfolios
Target maturity portfolios provide a simple investment strategy for retirement plan participants who are unsure about how to best select investments that provide diversification across asset classes.

Retirement Income Solution
The Investment Strategies Division at Mesirow Financial has developed a retirement income framework that seeks to optimize both the product allocation and asset allocation for traditional investment products and advanced retirement income products.

Manager Search and Due Diligence
Institutions often look for assistance in finding appropriate funds from independent third parties like Mesirow Financial’s Investment Strategies team.

Alternative Allocation Strategies
Mesirow Financial Investment Strategies has developed an alternatives optimization procedure that does not rely on some of the key assumptions that limit the usefulness of traditional methods when dealing with alternatives.

Stable Value Product Due Diligence
The independent due diligence experts at Mesirow Financial provide a detailed due diligence report on various stable value products used widely in retirement plans.

Precision Fund Insight
Precision Fund Insight provides direct access to Mesirow Financial,s due diligence data, supplying a roadmap for DCIO sales, national account and retail sales teams with the information they need to better target their efforts and empower retirement plan advisors to garner assets.

– See more at:


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