Some of you may object to relying on providers' lists of "consideration funds."
Won't they, you wonder, "game" you by listing their lowest cost funds? Aren't you opening yourself to manipulation? Well, theoretically, yes, but in my experience, vendors who provide lists of "consideration funds" are, usually, offering what they truly consider their best offerings. You should have their entire fund line-up as well, along with some kind of investment policy you can apply, if you want to assess other choices to avoid being "gamed."

Keep in mind, in a benchmarking you are trying to create a structure to analyze substantial amounts of data. At some point, you need to make choices as to how information will be evaluated; what weight will be given to disparate bits of data. In my experience, in constructing a pricing analysis of fund and investment menus, you need structure right from the start; you need some way of reducing the number of funds you are analyzing. I've found that telling each vendor (1) you are analyzing fees as well as investment performance, (2) that your review is competitive and (3) that fees are a major but not the only factor, ensures you receive decent "consideration" lists. Certainly, develop your own system if you're uncomfortable with the approach suggested here.

I've also found that asking vendors for "consideration" lists is a way to find out how strongly a vendor is focused on getting as much money as possible into proprietary or a select list of funds. I see it all the time: A vendor may offer 300, 500, 5000 funds but an overwhelming number of the plans they service have the same small group of proprietary or high revenue-sharing funds. When that shows up, you need to turn back to the vendor and ask for more information on (1) why certain funds were selected and (2) what happens to their pricing if you significantly alter that list. Sometimes, I construct multiple models for a single vendor to see how pricing, and investment options, change as the funds listed change. Shifts can be quite significant.

Finally, keep in mind the difference between a search and benchmarking. If you are benchmarking your plan expenses your standard should be "reasonable." Here's a way we determine that:

Not long ago, as part of a new, on-going consulting relationship, we undertook a benchmarking study for a client who was, and still is, generally, pleased with their provider. The plan runs smoothly, reports are on time, the provider is responsive. Overall, the client was satisfied. However, the plan hadn't, in 10 or so years with the provider, ever been benchmarked, let alone put out for bid.

Using the 90-10-10* system described above, in two weeks' time, we found an "all in cost" range of 0.62% to 1.07%, in a field of 12 providers. The incumbent, at 0.92%, was among the three most expensive. In this case, we provided each vendor with the current fund line-up, just as we've recommended you do. We asked for, and received in every case, a "consideration funds" list as well as a complete list of funds available but, reviewing the options, saw very little reason, since this was a benchmarking study at the start of an on-going consulting relationship, to make adjustments.

Results of our study in hand, we approached the incumbent and were told they believed they were efficiently priced, "in the ballpark," I believe was the phrase. They declined to review their pricing. Fair enough. Sometimes a survey turns into a search.