Being an advisor who focuses on selling and servicing corporate 401(k) plans is a matter of balance, says David Tyrie of Putnam Investments. “It’s not a seesaw any more–you have to balance at least three different constituents,” he argues: participants; plan sponsors; and the advisors themselves who must be able to make a living from the plans. There must be obvious benefits for each of those constituents, which is why, he says, the Pension Protection Act (PPA) is such a positive development, particularly for workers. Everything behind the PPA “is geared around the participant; it’s made plan sponsors take much more seriously their responsibilities to participants.”
Putnam has about $60 billion in retirement plan assets, serving 1.2 million participants, says Tyrie, and slightly more than 800 401(k) plans, according to the latest Investment Advisor retirement plan partner directory. Tyrie, the director of retirement services at Putnam, discerns many positive trends surrounding retirement planning that will benefit plan participants, and the advisors who are prescient enough to specialize in achieving that balanced approach. That’s because advisors can provide such an important service to plan sponsors, since they can “look at the entire picture–choose the right plan, make sure participants are educated correctly, and that they have the greatest likelihood of achieving a successful retirement.”
While the foundation of the PPA is focused on the participant, Tyrie notes that on the plan sponsor side of the equation, “it’s all about the fear factor–fiduciary and liability–but we know the name of that game: if you’re near the scene of an accident, you’re a fiduciary, guaranteed.”
On the issue of 401(k) fees, which has become a cause celebre in Congress and among many advisors, Tyrie suggests that “two years from now, it won’t have anything to do with the fees, it will all be about value–What are you getting for the fee? How do I say fees are too high or too low if I don’t know what I’m getting for those fees?” So does that mean there will be more transparency when it comes to 401(k) fees? “Absolutely,” Tyrie responds.
As one sign of how transparency around fees will change, Tyrie points to the revisions to IRS Form 5500, which retirement plans must file each year. “Under the PPA, by 2008, your 5500 filing will have to actually show all the fees that are being paid to the advisor, and for which services. Nothing’s going to be hidden in the future.”