Procrastination by some firms may open a window for other advisors and broker-dealers to distinguish themselves as fiduciaries. This has to do with a ruling requiring 401(k) plan sponsors to disclose certain fees. The broker-dealers and advisors who work with the sponsors are the ones responsible for providing the data. A deadline of August 30 looms but many are dragging their feet and may lose business as a result.
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Sponsors are charged with discussing the fees with plan participants to make sure those clients understand the fees. The level of the fees may cause many employers to be uncomfortable since the disclosure will tell employees how much it is costing them to participate in the plans. In some cases, that amount may be off putting—even to the point of outweighing the benefits of participating.
The disclosure rule was passed in 2010 and the original disclosure date was July 16, 2011. That date has been pushed back twice, yet some plan advisors and broker-dealers still have not gathered the necessary data.
Clients are already making inquiries about the fee disclosures
and those advisors and broker-dealers who continue to procrastinate will place themselves at a competitive disadvantage.
There will be a window of opportunity where the plan sponsors who have not received the information they need may be willing to work with other advisors and/or broker-dealers. If there are plan sponsors you wish to work with, you can help clarify a reasonable level of fees and also help sponsors know how to use the data they receive from their providers.
You can cite the fulfillment of fiduciary duty as a distinguishing point if you’ve already provided the information to your sponsor clients.