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Get to the lowest share price possible

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I’ve done a lot of talking about institutional share classes and revenue sharing and the confusing alphabet soup of share classes. I don’t think I was speaking in that language called ERISAese, but if I was, let me make it perfectly clear for everyone.

Whether it’s called institutional, admiral, or has some alphabet designation, it is the role of the plan sponsor to find the least expensive share class of a mutual fund that’s available to them. That’s it. If they pick a higher share class than what’s available to them, they are asking for trouble by someone accusing them of violating their duty of prudence.

It reminds me of the old story of my cousin whose father was wealthy because his father owned a hat manufacturing business. We both had Apple II computers. She bought her version of Print Shop at the local computer store for $60. I bough my copy for $32 through mail order. It was the same product. The fact that her father overpaid was on him because it was his money. A plan sponsor can’t say that because they would be overpaying with the participant’s money and that’s what happens when you’re a plan fiduciary.

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