16.07.2020 01.51 GMT+0000

New DOL guidance would provide advisors with incentives to sell commissionable products.

DOL Completes Trifecta of Questionable Policies

DOL Completes Trifecta of Questionable Policies

The DOL’s new guidance reinstates prior definition of investment fiduciary and offers new exemption for (otherwise prohibited) forms of compensation for plan fiduciaries.

The Department of Labor has issued new guidance defining when an investment adviser is a plan fiduciary--and the standards that must be followed by investment fiduciaries. The guidance reinstates a 1975 test defining investment fiduciaries and proposes a new prohibited transaction exemption allowing fiduciaries to collect commissions and third-party payments.

02.07.2020 09.56 GMT+0000

The U.S. Department of Labor has issued new proposed regulations that provide guidance on the process that plan fiduciaries should use in selecting ESG investments. In issuing the proposed regulations the DOL targets ESG funds and creates new requirements--and hurdles-to the use of such funds.

DOL Delivers Lump of Coal to ESG Funds

DOL Delivers Lump of Coal to ESG Funds

Proposed DOL regulations would add new restrictions to the use of ESG funds.

The Department of Labor has issued new proposed regulation regarding intended to guide plan fiduciaries seeking to invest in funds that utilize environmental, social and governance (“ESG”) considerations. The proposed regulations identify specific (additional) steps that fiduciaries must take in order to utilize ESG funds and would prohibit use of ESG funds within plan “default” investments.

25.01.2020 05.01 GMT+0000

In selecting new providers and reducing plan costs, fiduciaries need to be alert to the conduct of deselected providers.

Winning While Losing

Winning While Losing

Terminated Providers May Represent a Special Fiduciary Challenge.

Scrutiny of plan fees may create situations where an incumbent plan provider can make more by losing a highly competitive bid for an employer-sponsored plan -- and then actively “harvesting” accounts and assets from that plan--than by retaining that plan. And, once deselected, the provider-- and individual representatives employed by that provider--may have a strong economic incentive to encourage participants to move assets out of the employer-sponsored retirement plan and into the retail products of the (deselected) provider.

13.12.2019 06.59 GMT+0000

Fee compression affecting retirement plan providers has been well documented. However, it is harder to track efforts by these providers to shift revenue out away from the watchful gaze of plan fiduciaries.

Actions and Reactions

Actions and Reactions

Retirement plan providers are under pressure to reduce fees--and are likely to respond by shifting more focus to non-plan products.

Under Newton’s Third Law, for every action, there is an equal and opposite reaction. Fee compression for retirement plan providers, such as plan recordkeepers and investment providers, is well documented. However, it is harder to document provider efforts to replace compressed revenue from sources just beyond the scrutiny of (most) plan fiduciaries--through the sale of non-plan products to individuals participating in employer-sponsored plans.

12.09.2019 01.12 GMT+0000

More fiduciaries are reading and hearing about the risks posed by conflicted provider service models.

Focus on Conflicts Gains Visibility

Focus on Conflicts Gains Visibility

Awareness--and concern--about the impact of DC provider conflicted service models continues to gain visibility.

Concern about plan providers and the risks of conflicted service models continues to gain visibility as RetireAware leadership takes this message to two national audiences.

25.04.2019 01.27 GMT+0000

It’s official--retirement plan fiduciaries need to start caring about vendors’ use of participant data to promote non-plan related financial products and services.

Vanderbilt Settlement Sends Fiduciaries a Message

Vanderbilt Settlement Sends Fiduciaries a Message

• The settlement focuses on limiting the ability of the current recordkeeper (Fidelity) and any future recordkeeper from using participant data.

In a significant development, Vanderbilt University has settled a fiduciary lawsuit--and the settlement includes prohibitions on the use of participant data by plan vendors to market non-plan products.

04.03.2019 07.47 GMT+0000

In recent weeks a new fee, imposed by Fidelity on low cost mutual funds options offered on Fidelity’s recordkeeping platform, has been described in the media and in a new lawsuit against Fidelity.

Who’s Inside Your (Participants’) Wallets ?

Who’s Inside Your (Participants’) Wallets ?

Plan recordkeepers, facing challenges to their traditional revenue models, are looking for new revenue sources. These new sources pose legal challenges for the recordkeepers and practical challenges for plan fiduciaries.

In recent weeks a new fee has been described in the media and in a new lawsuit against Fidelity. The fee, identified as an “infrastructure fee,” is imposed on mutual funds that seek “shelf space” on Fidelity’s recordkeeping platform and that do not otherwise pay sufficient amounts to Fidelity in other (more traditional) fees. The infrastructure fees have triggered a lawsuit and, according to the Wall Street Journal, a DOL investigation. More importantly, these latest revelations about Fidelity’s infrastructure fee serve as a stark reminder that plan providers’ quest to identify the true amount of recordkeeper fees -- and determine if such fees are reasonable -- is an ongoing and constantly evolving challenge.

07.11.2018 11.35 GMT+0000

A number of long-term market trends are creating significant pressure on bundled recordkeepers’ revenues. The recordkeepers are responding to these revenue pressures through a variety of ways that impose additional costs on plans and participants.

Fee Compression: Fiduciaries Take Note

Fee Compression: Fiduciaries Take Note

Retirement plan recordkeepers are seeing ongoing pressure on fees. Their approach to developing alternative revenue sources could have implications for plan fiduciaries.

Revenue for “bundled” recordkeepers have been facing downward pressure for years--both on recordkeeping fees and asset management fees. Over the past decade recordkeeping fees have dropped 50 percent and investment fees paid by 401(k) plans have dropped by 38 percent over a similar period. These bundled recordkeepers are looking to fund managers, plans, and individual participants to compensate for this decline. The recordkeepers’ search for new revenue sources can create challenges for plan fiduciaries and sponsors and should be monitored closely.

27.09.2018 04.19 GMT+0000

Retirement plan fiduciaries should review disclosures from plan providers carefully. Disclosures provided may not be true or false; rather, they may be somewhere in between.

True or False…or Somewhere in Between?

True or False…or Somewhere in Between?

Federal securities law may contain some helpful insights for retirement plan fiduciaries, as they assess disclosures supplied by service providers.

Retirement plan fiduciaries rely on plan providers (such as recordkeepers) for key pieces of information to fulfill the fiduciaries’ legal obligations -- even if those disclosures reveal some unflattering truths about a provider. In assessing representations from providers, plan fiduciaries would benefit from guidance in assessing when and how to push back. Federal securities laws may provide some help in this regard.

11.09.2018 12.42 GMT+0000

Recordkeepers who also sell financial products and services are subject to regulation by the SEC. Recent events indicate that the SEC may fill the void left by DOL inactivity on replacement of the defunct fiduciary rule.

From DOL to SEC and Beyond

From DOL to SEC and Beyond

Will the SEC Play a Larger Role in Retirement Plan Governance?

Events of recent months indicate that a regulatory shift may be occurring. The Department of Labor has gone silent on the conflicts of interest in the financial industry that affect retirement plans, while the Securities and Exchange Commission seems to have taken up the responsibility for addressing these issues.