Defined Benefit Plan Providers: Taking a Look at Fidelity, Vanguard and Schwab


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So of course I am a little biased. At Emparion, we think we are one of the best defined benefit plan providers. Our belief is that the tax structuring advice and administration services exceeds what others in our industry provide. But I know that most of our competitors believe that they are superior. I get it.

So we think it makes sense to at least do a quick review and comparison of some of the defined benefit plan providers in the market. That way you can decide what administrator works best for you.

Review and Comparison

But before we dive in, I think it makes sense to defined exactly what a “provider” is. Many people confuse defined benefit plan providers with custodians. Providers are really just administrators who set up plans, monitor compliance, file the required IRS forms, and hold your hand along the way.

But a custodian is a little different. A custodian will hold the company assets. They might also perform a financial advisor roll and help the plan sponsor with investment decisions. It just depends on the relationship.

Most people who set up a defined benefit plan will have an adminstrator who is separate from the custodian. There are many reasons for this, but let’s just say that administrators are very adept at customizing plans and staying independent from financial decisions.

Online Providers

Many of the big institutional defined benefit players offer both custodial services and investment options. When looking for a plan provider you have many choices. But don’t forget that retirement planning can be complex. It requires more than just setting up a plan and making contributions.

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So let’s take a look at the players in the defined benefit plan space and consider some of the popular online brokers. The great news is that our plans can be used on any of the online platforms. Yes, we are qualified and approved on them all. All you need to do is take our customized plan document and open an account with any of the custodians.

With this scenario, you get our tax planning and structuring combined with the investment options of the large brokers. We think it is a win-win.

Fidelity: One of the most established

Fidelity was one of the pioneers in the online brokerage space. They seem to be the preferred choice for many of our older clients. Many have had accounts set up with them for years or even decades. So there is a comfort level.

The issue you may find is that when you contact their business retirement plan department, it’s tough to find someone who will understand the mechanics of setting up a defined benefit plan. You can talk their institutional retirement department, but that most likely won’t do you much good unless you have a large plan with 100+ employees.

chart with finance, tax and debt

If you are looking for an IRA or a solo 401k then Fidelity’s plan department can be a great resource. The focus is on custodial services and offering tools that can help business owners. Take a look here.

Schwab: One of the most favored

I’ll give you my two cents. Charles Schwab is probably the #1 provider that we work with. It seems that we get the most requests to set up plans for Schwab.

We love working with Schwab and we have a preferred contact group at the company that we can send our plans over to and get them set up. That makes our solution turnkey.

In recent years they have offered more flexible investment options and more low cost products. This has helped them garner more assets in the defined benefit space.

So what about Vanguard

Vanguard has become one of the more popular custodians in the last several years. They have a reputation of having very low cost fund options.

While I believe this is certainly the case, Schwab has recently come out with aggressively priced products. So I’m not sure that Vanguard is really still the low cost leader. But needless to say, they still have a great offering and are one of the more popular options.

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But what many people don’t realize is that Vanguard doesn’t directly administer plans for small businesses. You can read more about is here. So as a small business or solo practitioner, you really have to just go to a third party administrator like us.

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Try called the Vanguard small business retirement support number and you will see for yourself. They tend to be very efficient at setting up 401k plans and IRAs, but won’t provide much defined benefit plan support. Like most vendors, they really just want funds under management. This works for us.

I enjoy working with Vanguard very much. We have a preferred representative there who sets up all our client accounts. It is a really streamlined process.

Best Defined Benefit Plan Advisors

As a small business owner, you need to know your options. Defined benefit plans can be very difficult to understand, that’s why selecting the right provider is so important.

Planning for retirement is not a “one size fits all” solution. You need an advisor and administrator that you can trust. One that can customize and tailor a plan to meet your needs. Hopefully, we have given you a little guidance to you can find a plan that works for you.

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Paul Sundin

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2 thoughts on “Defined Benefit Plan Providers: Taking a Look at Fidelity, Vanguard and Schwab”

  1. Do you have a preference which custodian to use? I personally have most of my investments with Fidelity, but was not sure what you thought. Thanks.

    Reply
    • Hi Pete – We really don’t have a preference. Most of our clients use Schwab, Fidelity or Vanguard. But you can use your own advisor if you like. Fidelity is a great custodian so if you are happy with them then stay put. In fact, we have a rep at Fidelity that can help get your account open if need be. Just let us know how we can help.

      Reply

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