The Department of Labor (DOL) will continue to scrutinize the indirect compensation that advisors acting as pension consultants receive, warned Alan Lebowitz, a DOL official, at the “DOL Speaks” conference in Washington May 21. “This will be an ongoing enforcement area for us,” he said. DOL began its own examination of advisors who act as pension consultants after the SEC conducted its sweep examination of these arrangements. Some of the DOL cases against these advisors “are coming to action,” he said, with more new cases being opened. The SEC conducted its sweep because of concerns that pension consultants could steer clients to hire certain money managers and other vendors based on the pension consultant’s (or an affiliate’s) other business relationships and receipt of fees from these firms, rather than because the money manager is best suited to the clients’ needs, therefore compromising the advisor’s fiduciary duty.
Meanwhile, DOL’s proposed rule 408(b) 2, which would require fee disclosure to plan fiduciaries (brokers, advisors), will be completed this year as well as DOL’s investment advice regulation, noted Brad Campbell, assistant secretary of DOL’s Employee Benefits Security Administration. Another proposed rule that would be released in a matter of weeks, Campbell noted, would require service providers to disclose fees to participants.
DOL’s improved fee disclosure changes to Form 5500–the primary disclosure document plans must file noting their financial condition, investments, and operations–were completed last year.