Columbus, Ohio-based Nationwide Retirement, a provider of retirement plans, is getting ahead of both regulation and legislation calling for increased fee disclosure in retirement plans with the release of its new 401(k) plan, Clear Advantage.
Clear Advantage provides sponsors with an up-front discussion on pricing, thereby allowing sponsors and participants to track its true performance and make more informed decisions. The plan also features a credit system whereby any payments made by a mutual fund are credited back to the plan participants through reduced costs–something that takes disclosure to a whole new level, says Matt Riebel, vice president and COO at Nationwide Retirement.
On the legislative front, the “401(k) Fair Disclosure for Retirement Security Act,” proposed by Rep. George Miller (D-California), Chairman of the House Education and Labor Committee, did not pass the full House before Congress adjourned for the year, but Miller has indicated that he intends to take the issue up again in 2009.
Meanwhile, the Department of Labor (DOL) has engaged in a three-part project to increase fee disclosure in 401(k) plans. For instance, modifications to Rule 408(b)(2) would govern disclosure by service providers to plan sponsors, while another regulatory project governs disclosure by plan sponsors to plan participants, and has been released in proposed form. DOL hopes to finalize these two projects by the end of the year, and has received numerous public comments on the proposed regulations.
“We created and built a product that is so focused on transparency and hidden fees because it is flat out the right thing to do,” Riebel says. “We need to be clear about what something costs and what someone pays. It’s also clear that legislation in our industry is moving toward disclosure and transparency, and we felt we could either react to it, or be proactive and get ahead of the industry and legislation, and we chose to do the latter.”
It was by sheer coincidence that Nationwide Retirement unveiled Clear Advantage just before the worst financial and economic crisis in history hit America. But the release could not have been more opportune because transparency in retirement plans is certain to become an even greater priority for a great number of plan sponsors and participants going forward.
“This was a really good product when we first rolled it out and as the last weeks have unfolded, it’s even more of a good product,” says Riebel.
Clear Advantage, Riebel says, was based upon a thorough analysis of what Nationwide’s customers – plan sponsors, participants, partner administrators–really want to see featured in a retirement plan. “We used consulting firms to find out what our folks really want,” Riebel says, “and it’s clear that transparency, no hidden fees, and getting ahead of the legislation in our industry are what people want.”
The current market crisis has, more than anything else, once again highlighted the need for professional investment advice and guidance with respect to proper retirement planning, Riebel says.
“The value that qualified investment professionals bring to the table cannot be ignored and especially now, when the market is such a mess, it is extremely difficult for people to try and figure out their retirement on their own. They need someone to help them, and investment professionals are our partners, so if we can provide them with a great tool, they are going to be asked to be a resource.”
This is why the Clear Advantage plan offers customers a “do-it-for-me” managed solution, complete with advice and active money management–a path many more people are likely to take as the crisis unfolds. But Clear Advantage also offers self-directed brokerage accounts for do-it-yourselfers.
With a more visible and transparent fee structure, Clear Advantage is in a position to offer the best performing mutual funds to its customers, Riebel says, and the plan features more than 150 brand-name retail mutual funds. There are no proprietary fund requirements, so plan sponsors are never forced to choose Nationwide funds.
“Plan sponsors have a fiduciary responsibility and we have to help them meet that responsibility,” Riebel says.
To this end, Nationwide Retirement has a series of tools to help plan sponsors, one of which is the Fiduciary Series, which takes into consideration both the cost and the consistency of performance of the different mutual funds that sponsors might choose to include in their plans. Nationwide screens all the funds and gives each one a “batting average,” Riebel says, which then gives plan sponsors a far better idea of each product when deciding their lineup.
“This tool is unique in the industry–we have had the Fiduciary Series for a number of years and we are always adding new pieces to it, so it’s a work in progress,” Riebel says.