07.11.2018 11.35 UTC

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 UTC

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.

12.09.2018 09.24 UTC

Listen to an overview discussing what Principal Review does--and why it matters

Why This Matters: A Conversation with Dan Alexander

Why This Matters: A Conversation with Dan Alexander

Understanding Conflicts of Interest in Retirement Plans

Listen to Dan Otter of 403bWise interview Dan Alexander (Founder, CEO and Managing Director of Principal Review) to discuss how conflicts of interest and undisclosed compensation structures pose risks to plan sponsors and plan participants - and what can be done.

11.09.2018 12.42 UTC

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.

18.07.2018 11.21 UTC

A recent study provides strong evidence that the financial industry implicitly tolerates adviser misconduct and that certain firms have created a secondary market for advisers who engage in misconduct.

Patterns of How the Financial Industry Tolerates Misconduct: Birds (and Advisers) of a Feather Flock Together

Patterns of How the Financial Industry Tolerates Misconduct: Birds (and Advisers) of a Feather Flock Together

This paper helps demonstrate how it is not enough for plan fiduciaries to rely on regulatory rules to protect against predatory behavior; as in so many horror movies, the predator is already inside the house.

A recent paper raises some important - and troubling - issues about how the financial industry treats advisers who engage in serious misconduct. The paper demonstrates how investment adviser misconduct is tolerated and how advisers who engage in misconduct are likely to be concentrated in certain firms.

22.06.2018 10.46 UTC

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 UTC

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.

10.05.2018 11.30 UTC

Financial firms have both the opportunity and the financial motivation to move customers from employer-sponsored plans to individual products, such as retail managed accounts and annuities. An investigation of Wells Fargo bank may disclose whether the bank succumbed to the temptation.

Et Tu, Wells Fargo?

Et Tu, Wells Fargo?

An investigation does not mean there was any wrongdoing by Wells Fargo.

Wells Fargo bank is reportedly under investigation for practices in the bank’s retirement plan division. The investigation apparently focuses on practices that may have been intended to move clients from employer-sponsored plans into more expensive individual retirement accounts when they leave their jobs. If these reports are accurate it may help shine a light on industry practices that contribute to plan “leakage.”

27.04.2018 03.36 UTC

The SEC’s proposed new rules require broker-dealers’ obligations to act in customers’ “best interests.” The SEC proposal, in some ways, fills some of the gaps created by the recent court decision to invalidate DOL regulations expanding the definition of ERISA “fiduciary.”

The SEC Enters the Fiduciary Fray

The SEC Enters the Fiduciary Fray

The SEC has now weighed into this fiduciary fray, proposing new rules governing the behavior of broker-dealers.

The SEC has proposed new rules governing the behavior of broker-dealers. Under this proposal a broker- dealer “shall act in the best interest of the retail customer . . . . without placing the financial or other interest of the [broker-dealer] ahead of the retail customer.” The primary requirements of “best interest” are that broker-dealers disclose fee structures and not place their financial interests ahead of customers’ interests.

10.04.2018 04.07 UTC

The latest court decision invalidating the DOL’s proposed rewrite of the fiduciary rules adds more uncertainty for plan fiduciaries. How do fiduciaries get past the “noise” of conflicting courts and regulators and go about the business of protect plan interests?

Nature Abhors a Vacuum – and So Should Fiduciaries

Nature Abhors a Vacuum – and So Should Fiduciaries

Conflicting court opinions, dueling regulators and uncertain direction from the executive branch are making it harder for plan fiduciaries to do their jobs.

The U.S. Court of Appeals for the Fifth Circuit decision to invalidate the DOL’s new fiduciary rule is the latest in a string of confusing (and often conflicting) messages to plan fiduciaries. However, fiduciary duties under ERISA are grounded in some core principles that have not changed. The legal confusion surrounding certain fiduciary issues cannot obstruct fiduciaries’ execution of those duties.