How much does OctaveWealth charge for its services?
There is a one-off setup fee of $499 and then a fixed monthly fee based on the number of employees in your company. For plans with less than 100 employees, the fixed monthly fee is $120 + $4/employee with $5/month charged to the employee.
This includes plan design, on-going administration, investment management services and custody of assets. There are no hidden extras, period.
Our pricing for companies with more than 100 employees still follows this flat-fee structure, but there are a few more options. Please contact us for a custom quote.
Is there an additional cost for employing OctaveWealth as the Investment Manager for my plan?
No, this is built into the fixed monthly fee detailed above. We don’t charge a fee based on the size of assets invested in the plan because these can significantly erode investment performance.
Are there any additional charges passed onto employees?
No, we don’t charge any additional fees. Typical low fee 401(k) plans tend to push costs onto employees, deducting a quarterly percentage-fee from their accounts. These fees eat into their investment returns, and when compounded over their lifetime can reduce the size of each employees’ retirement funds by $100,0001, even with conservative estimates.
What about management fees, trading commissions and custodial fees?
All trading costs are included in our fixed monthly fee, and no additional trading commissions are charged.
Employees will incur a very low management fee for the funds they own. This fee is charged directly by the fund provider, not OctaveWealth. One of the main reasons we recommend investing with passive index funds is that they have a much lower management fee than alternative investment vehicles, typically averaging less than 0.10% for an OctaveWealth portfolio.
OctaveWealth also does not pass on the fee charged by custodians for securely holding the assets.
How is this different to other 401(k) plans?
To make plans look cheaper, many competitors lower employer-fees and push costs onto employees, charging an asset-based percentage fee. As these fees compound over time, they can reduce the size of employees’ retirement funds by up to $100,0001.
Our employer fee is a one-off setup fee and a per-employee monthly administration fee.
Our employee fees, or lack thereof, is where we are different. We don’t charge employee fees for two reasons:
The point of setting up a 401(k) is to help employees save for retirement, and these fees and significantly effect returns
Recent advances in computer power and automation mean we can provide a world class investment management service for a very low cost.
Many other plans will push asset based fees, a custodial fee and trading costs onto employees, and whilst individually these may look small, when combined and compounded over their lifetime, they can be significant.
This doesn’t even take into account the providers who push high-fee mutual funds into their plan, which charge a 0.5-2% management fee.
When does OctaveWealth charge its fee?
Our monthly fee is charged upfront on the first of the month. For plans starting mid-month, the first month is pro-rated.
Are these costs tax deductible?
Costs for running a 401(k) are typically tax deductible, but please refer to your tax advisor.
What is the IRS tax credit for new plans?
If your businesses has between 1 and 100 employees, and you are setting up a new plan, you may be eligible to claim a tax credit of up to $500 for the first three years of your plan.
You can claim 50% of the costs associated with plan set up, administration, and employee education, upto the $500 limit.
For more details, see [here] 1.