Fresh Perspectives
Like it or not, 401(k) plan fees are front and center across the country. The Department of Labor and Congress are addressing the topic in Washington, and mainstream media seem to have new relevant articles weekly. In the adviser world, fees are always a pertinent topic of conversation, and we have three articles this month that relate to your fees, plan fees, and the happenings on Capitol Hill. Our cover story, “A New Dimension,” takes a look at the movement toward fee-based models across the industry, even at some wirehouse broker/dealers. As advisers take another look at their revenue models, many are finding the industry responding to them with support services.
One continued area of interest in the fee world, as revenue-sharing comes under fire, is the ERISA account. Despite a lack of regulatory clarity around this recordkeeping system, many providers and advisers say the account helps ensure a plan is getting what it pays for. See how in “A New Way to Pay.”
In his column in this issue, Nevin Adams says that the industry needn’t be afraid of fee disclosure. In fact, he says, we need to tell participants “the truth about retirement expenses, we need to be blunt about the realities of their current savings patterns, and they need to understand that these services we work so hard to provide have a cost” (see “Reference Points“).
Other than fees, retirement income continues to be a hot topic in the retirement plan world. One thing is certain: As the industry gets closer to confronting the retirement income needs of the Baby Boomers, all advisers will be searching for answers to how to utilize this new generation of products. Therefore, we begin a series of articles that will explore the various aspects of each of these emerging models. In this issue, “Finding the Right Vehicle” offers an overview of the articles to come.
Our series on benchmarking investments covered managed accounts in the January-February issue and balanced funds in the March-April issue. This issue, we continue the focus in “An Elusive Target,” discussing the difficulties faced by those trying to benchmark lifecycle or target-date funds, something even more important since they may be the qualified default investment alternative of choice. The real crux seems to be that, for many advisers, the numbers, the empirical data, are the least important of the criteria.
Also in this issue, advisers and providers share how they make their relationships work in “More Than Middle Men” and we visit some lawmakers in Connecticut to learn about the proposed legislation that would create a state 401(k) plan for small businesses. We also continue our increased coverage of the 403(b) plan market with news from PLANSPONSOR’s 403(b) Summit.
Our columnists weigh in as well. Steff Chalk suggests that what your clients really need is someone to help them understand their fiduciary responsibility in “Want Adds” and, in “Raising the Bar,” Quana Jew details the Department of Labor’s new safe harbor for small plan contribution deposits. This issue’s guest columnist is Chad Larsen, who, in “Education for All,” gives his opinion about the need for participant education in the post-Pension Protection Act era.
Whichever topic you wish to implement in your practice, this issue spans them all. I hope you find the articles helpful as you decide how you will grow your business. Enjoy.