Yes fees vary widely by client. You cannot charge the same fee for a valuation of 5 participants vs a valuation of 100k participants.
As stated measuring profitability is based on hours recorded. You want to take that away because…reasons
A scam how? And how is this relevant at all?
Well, you get a promise that you’ll get money when you get old and then a lot of times you don’t when it runs out (oops!) so you’ve got these giant regulations put in place and a lot of people like actuaries taking a cut. Then you have dumbass fund managers putting the money in things like FTX. It’s just more efficient for people to save their own money.
There will always be clients that involve more time. But then again, some you only hear from 2 or 3 times a year.
In my line of work, the responsibilities don’t change much from client to client, only the day-to-day contact does. We don’t charge more if a client calls me every day instead of once a week or once a month (maybe we should). On the flip side, the clients that only send in their data in January and get only two or three things done for them in a year don’t get reduced fees.
Again, it’s the owners/management’s job to figure out the fees vs costs ratio.
Plus, there’s a finite amount of work to be done in a year. As long as it gets done and within that expected profit margin, why sweat the time spent. My employer does not pay me by the hour, why should they bill by the hour? If I get three things done today at $1,000 each, why should my employer care if I was done at 2 PM or 7 PM? I still get paid my 1/260 * $45,000 for my days work and they get the same profit.
If they are good at that sure. Not everyone is.
In England, they call pension plans “schemes.” maybe they are onto something…
Right. base fee (say) $1,000 and maybe $25/person for small plans and $0.10 for mega-sized.
Side note: The biggest plan I work on is roughly 4k participants.
So you charge exactly the same for a client with 5 participants vs one with 200,000 participants to do their valuation? This is nonsensical.
shot in the dark and with no way to measure if this is profitable because people don’t have to track their time. got it. great strategy.
Thing is, with a pension plan, it’s company money promised to you later, not your own.
And truthfully, how confident are you people will save on their own accord?
Not really, but pensions crises are a real thing and I’m not sure if it’s better to have a government go bankrupt because of it.
Under my rubric above, it would be $1,125 for a 5-person plan and $21,000 for the 200k one.
:squinty_eyes: unclear if joke or not realizing that actuarials are in opex
Clearly you didn’t read @meep 's blog
do you realize that your rubric is way too cheap for both?
regardless there is no easy way to measure the profitability without tracking time, thus all the large consulting firms have you track time. i’m assuming you work for a small shop as none of the larger firms do it the way you’re suggesting.
Certainly charging by the hour is one way to determine pricing.
It’s not the only way. Insurance premiums are basically an estimate of claims + overhead costs + profit, and the overhead is estimated. I’ve worked on revising the overhead estimates… you can get as sophisticated as you want to get, but tracking time isn’t essential.
And in some cases I would argue that tracking time isn’t always fair to the clients. The first time I do something I’ve never done before maybe it takes me 4 hours. The second time maybe it takes me 3 hours. The third time it takes 2.5 hours then 2.25 then 2 then 1.75 and eventually I get to the point where I’m spending 1.5 hours every time I do it.
Is it fair that the client I happen to work on first is billed for 4 hours when the client I happen to work on 10th is billed less than half for the same thing? It would probably be fairer to just charge all clients the equivalent of 1.75 hours.
There’s flaws with every system, and a lot of inertia. Pension consulting has billed by the hour for decades. Maybe that’s the least flawed system for that line of work, but they all have flaws.
What is profitability?
Revenue minus cost
Revenue is how much in fees you bring in, including asset trails and fund kickbacks, etc.
Cost is how much you pay your employees + overhead + taxes
Notice no hours involved.
And again, who cares? The work gets done and your employer gets paid the same whether you spend 3 hours or 13.
You don’t get paid by the hour do you? Then why track hours?
and how do you determine by client if how much you pay your employees is profitable compared to how much you pay your client?
if the work is getting done for 13 hours and you’re charging them for 3 hours then you could raise your fees, but you won’t know this if you don’t track.
How long does it take you to do the val for a 5-person plan? Unless you are doing them on green sheets, probably two or three hours? That’s almost $300/hr. If you were paid $200/hr the company makes $100/hr. At 2,000 hours a year that would mean you would make $400,000 a year? do you make $400k a year? If so, I’m getting my EA next year…
Between the report, figuring out the strategy for allocating contributions and testlives its longer than that