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.

22.06.2018 10.46 GMT+0000

Over 20 million Americans are employed by state and local governments, including teachers, police officers, and social workers. ERISA, and the fiduciary protections of ERISA, do not apply to these governmental employees. This represents a risk to the retirement security of these employees - a risk that is likely to become more significant in the future.

Public Employees: (Un)Equal Protection Under the Law

Public Employees: (Un)Equal Protection Under the Law

Governmental employee retirement savings do not have the same protections as employees in the private sector.

ERISA’s fiduciary protections do not apply to governmental plans and participants in governmental plans do not receive the same fiduciary protections as employees in corporate or private, non-profit plans. This gap places governmental employee retirement savings at risk and as the role of defined contribution plans in the governmental sector expands, it becomes increasingly important that these risks are addressed.

31.05.2018 01.21 GMT+0000

There is significant evidence that consumers are placing their trust - and their money - with financial professionals who have financial incentives that conflict with consumers’ best interests. It does not appear that the current debates over professionals’ standards of conduct will make real progress in addressing this issue.

Dancing on the Head of a Pin

Dancing on the Head of a Pin

Regulators and courts may focus on the different rules for “investment advisers” and “brokers.” But, in the real world, this distinction confuses investors and undermines consumer protections.

There are key legal differences between investment advisers and brokers. However, consumers do not understand the implications of these differences. Consumers’ confusion is exacerbated by industry advertising, with references to “financial advisers,” “wealth managers” and “financial consultants” further blurring the difference between investment advisers and brokers.