PANC: Revenue Sharing: Getting Your Fair Share

Advisers need to “share’ revenue sharing information with clients was the consensus of panel members at PLANADVISER’s National Conference. According to panel member Mark Wetzel, President of Fiduciary Investment Advisors, LLC, fee disclosure can help an adviser find ways to add value to a plan, and sharing that with a client or prospect is a good marketing tool.

Wetzel said advisers need to tell clients where their money is going and what options they have to cut costs. A sponsor who balks at its fees and the revenue sharing between brokers or vendors and funds can change vendors or invest in lower share classes. It is good to compare the fee breakdown each year and reconsider the options, according to Wetzel.

Panel member Jason Chepenik, Managing Director of Chepenik Financial, suggests getting revenue sharing costs from vendors broken down on a per participant basis, then comparing that to the cost of operating the plan. Chepenick shares this information with his clients in an “Economics of a 401(k) Plan’ presentation and says that sharing this comparison with plan sponsor clients helps them understand the impact of revenue sharing.

Advisers must be sure to include information on revenue they are getting from funds themselves in fee disclosures to participants, panel member Andrew H. Prevost, President, Retirement Plan Division of Meltzer, pointed out. He added that advisers will then need to justify what they are doing to earn that revenue. Recently, a discussion about 401(k) fees is everywhere, he said; many newspapers have even begun writing articles, which might make plan sponsors increasingly concerned. As a result, honest discussion is vital, he said.

Prevost issued a warning for advisers getting into the participant advice arena in order to not be accused of steering participants to funds from which the advisers earn revenue. He suggested advisers’ advice fee be based on participants’ assets.

Looking into the future, Prevost suggested that there might be a time when there is equal revenue paid across all funds in a plan, instead of varying from fund to fund.