TOP 75 Wholesalers in Defined Contribution

The cover story of the Spring issue of NAPA Net the Magazine highlights the Top 75 DC Wholesalers and what to expect in the future in our ever-changing, dynamic industry that, for better or worse, is getting tons of attention. We’re all going to be judged on participant outcomes — and wholesalers will play an integral part.  The list linked below.

http://www.napa-net.org/2014-top-wholesalers/

Somehow or another, I'm proud to say that I made this list!  When broken down into the sub-category of Recordkeeping wholesalers, it is a Top 25 distinction.  Needless to say, I feel honored and grateful to anyone who felt strongly enough about my service to vote for me.

Thank you - Jason

DOL - Service Provider Fee Guides

"..We are particularly concerned that some employers, particularly small employers, may not be reaping the full benefits of the fee disclosure regulation.." - Phyllis Borzi

 http://www.planadviser.com/DOL_Proposes_Service_Provider_Fee_Guides.aspx
 http://www.pionline.com/article/20140311/ONLINE/140319966/dol-proposes-401k-plan-fee-disclosure-guide

This story was all over the place yesterday, I think I received six or seven separate emails on this topic.  Above are a couple of the links to the main story.  In essence, what happened was Phyllis Borzi stated on a national conference call that the Department of Labor (DOL) was very concerned about the fee disclosure documents provided by retirement plan service providers resulting from last year's 408(b)(2) rule change.  As a result they would be furnishing a new format for a fee disclosure guide that would be required explaining how to read the disclosures.  See the above links for the details.

My thoughts: 

This does not come as a surprise.  Between myself and several others at my firm, we've reviewed numerous fee disclosure documents, probably 15-20 from different service providers in addition to furnishing our own and what we've observed is essentially what we thought would happen.  The disclosures are mainly very complex, we believe intentionally so.  Our thought, and I'm sure this is going into the DOL's thinking on the matter is that the service providers will comply with the letter of the law, but not the spirit.  In other words, they will provide the bear minimum to meet the legal requirement, but make the disclosures so complicated that they would be extremely difficult to actually figure out what the plan expenses were.  Here are two examples (provider's name left out).

1.) One client received a disclosure from their service provider who was providing recordkeeping, third party administration, trust/custody and the investment platform.  I.E. it was all bundled.  Our firm acts as the plan's retirement plan and fiduciary consultant and as its' investment manager.  As part of our service we agreed to review and interpret the 408(b)(2) disclosure.  It was 82 PAGES!  It could have been done in three sentences, but it was 82 pages!!!  

2.) This example is another client of ours that we took over from a competing service provider last year, one of the larger insurance company platforms in a group annuity format.  The plan was a "small market" plan, under $5m in plan assets.  The 408(b)(2) disclosure was provided to us prior to our appointment.  It wasn't an 82 page situation, it was a different tactic altogether.  In this case, upon an initial glance by us, the plan's advisor, and the client, it appeared that the plan was only paying investment expenses which amounted to approximately 75-85 basis points or 0.75-0.85%.  If that were the actual expenses it would be extremely price competitive in the small plan marketplace.  However, after reading through it and digging through the fine print and following the instructions on where to look on different pages that explained how to perform some of their fee calculations, the plan expenses fell in at 2.28%, that's 228 basis points, a whopping 1.5% more expensive than the client thought they were paying.

What these two cases illustrate are two separate tactics, both of which are deceptive in my opinion, of service providers complying with the letter of the law but ignoring the spirit of the law which, simply put, was fee CLARITY.  After all, we, as experts were able to figure out the plan's true costs, but in both cases the client would not have been able to on their own.  

Good to see that the DOL is going to do something about this.  Remember, having an inexpensive plan isn't an ERISA mandate, but understanding fees and services and validating that they are reasonable is.