Compliance September 28, 2010

PANC 2010: Money Talks

 For advisers these days, disclosing fees is more important than what they make or how it is paid. 

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That is what James H. Williams, President, Financial Telesis, Inc., told attendees at the PLANADVISER National Conference. “It’s all about fee disclosure,” he declared.  

David Levine, Principal, Groom Law Group, pointed out that with new fee disclosure requirements of Form 5500 Schedule C, the information is online and plan sponsors can see what others are paying their advisers and what other advisers are getting paid. In addition, new 408(b)(2) regulations mean advisers will have to break down their fees and have to show their value. Levine suggests advisers use this disclosure as a marketing advantage to figure out how they can better differentiate themselves in the marketplace.  

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For one thing, Williams said because of 408(b)(2), advisers will have to talk about their fiduciary status and whether they are willing to be a fiduciary. He sees sponsors switching in the future to those advisers who are willing to assume fiduciary status.   

In addition, Williams said a potential differentiator for advisers in the future is plan sponsor education (see “Training New Plan Sponsors is Key“).  Inform them of their fiduciary status and help them with it.  

According to Patrick Oberlander, Executive Director of Corporate Retirement Plans, UBS Financial Services Inc., advisers will increasingly be asked by plan sponsors what they are being paid and what service they provide for that payment. Advisers should know how to articulate and defend their value.  

The industry will see more a la carte pricing menus for various services as a result of increased fee disclosure, said Doug Prince, Managing Director, Stifel Nicolaus. This can help advisers to show their value added services in detail and stand out.  

The panelists were split on what effect disclosure rules will have on adviser fees. While Prince and Williams said fees will go up as fee disclosure weeds out those advisers who do more specialist work and more specialist work will be in demand.  However, Oberlander sees disclosure putting a downward pressure on fees as competition grows and advisers become more aware of market norms.  

In any case, advisers should see disclosure as a good thing for their relationships with clients. “Sponsors look at you differently after you have a discussion about fees, especially when they had no idea what they were paying before,” Prince concluded.

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