20.03.2019 01.42 GMT+0000

More employers are implementing asset retention strategies. This may require more than a few changes to the plan design.

Ensuring the Effectiveness of an Asset Retention Strategy

Ensuring the Effectiveness of an Asset Retention Strategy

Is Your Recordkeeper Undermining Your Initiatives?

Attitudes about employer-sponsored retirement plans’ retaining the assets of terminated employees are starting to change. Asset retention strategies can benefit the plan as a whole and participants. However, an employer implementing an asset retention strategy needs to determine if the plan recordkeeper is also vying for those same assets and has an economic interest in undermining the employer’s strategy.

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.

06.02.2019 01.46 GMT+0000

IRA rollovers are big business for financial providers, representing over $450 million of annual inflows. “Bundled” recordkeepers can use a surprising variety of strategies to attract those assets from employer-sponsored plans-even plans the recordkeepers were hired to support.

The Lure of the IRA and the Power of Inherent Conflict

The Lure of the IRA and the Power of Inherent Conflict

“Bundled” retirement plan recordkeepers have significant financial incentives – and a surprising number of strategies—to convince employees to roll assets into IRAs.

Plan recordkeepers with “bundled” services can offer an array of financial services and products—including IRAs. When a plan participant has a distributable event (such as termination of employment or retirement) these bundled providers have tremendous economic incentives to favor the IRA rollover over retaining assets in the employer-sponsored plan. And, these providers utilize a surprising variety of tactics to attract this rollover revenue.

12.12.2018 06.53 GMT+0000

In the absence of new regulatory support, employers need to use their power in the market to protect participants from conflicted service models.

The (Financial) Empires Strike Back

The (Financial) Empires Strike Back

Initiatives to provide participants with protection from conflicted service models frequently meet with resistance from…the financial industry. What can employers do?

Government initiatives aimed at protecting retirement plan participants from conflicted advice are often resisted -- and occasionally derailed -- by the financial services industry. Employers must understand that regulatory agencies are constrained and, rather than wait for regulatory protections employers must understand that they are in the best position to protect participants.

27.11.2018 04.33 GMT+0000

A complaint filed by the SEC illustrates how brokers can create -- and capitalize on -- employee confusion about their employer-sponsored retirement plan.

Caveat Emptor. Really.

Caveat Emptor. Really.

Want To Buy A Bridge? Retirement Plan Providers Profit from Participant Confusion.

A complaint brought last year by the Securities and Exchange Commission alleges that four brokers targeted federal employees in the federal employees’ defined contribution plan and misled participants about the brokers’ relationship with the federal employees’ plan. Although the conduct described in this case is particularly egregious, this case has lessons for all plan sponsors and fiduciaries.

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.

12.09.2018 09.24 GMT+0000

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 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.

18.07.2018 11.21 GMT+0000

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.