An uncertain regulatory environment means opportunity for advisors to enter the 401(k) market, especially those looking for new products and a way to diversify their revenue streams, said Brian Graff, CEO of the American Society for Pension Professionals and Actuaries, in an interview with AdvisorOne from the 401(k) Summit on Sunday in Las Vegas. And he sees increasing interest from RIAs in particular.
“Of course, there are a lot of new rules, proposals and studies being discussed, and one of our missions is to provide educational outreach to help interpret these new rules,” said Graff, who is also ASPPA's executive director.
He noted that for advisors not regulated by FINRA or the SEC, the Department of Labor can, and should, step in to fill the void.
“I recently spoke at a DOL hearing in support of an expanded definition of fiduciary as it applies to 401(k)s,” Graff said. “In the 401(k) space, the DOL absolutely has a role to play in regulation. For example, if an advisor of record on a plan says to a client, ‘you should offer these 20 mutual fund options in your plan.’ Does that constitute advice? Common sense says absolutely. But how does that work from a fiduciary standpoint? Disclosure is the key, through some sort of seller’s exemption.”
The so-called seller’s exemption would work in the following way, Graff explained: If the advisor discloses to the client that they aren’t acting in a fiduciary capacity, that they are being compensated by the plan provider and they are transparent about the amount of the fees they are charging—and the client is OK with that—then they have satisfied their disclosure requirements.
“We believe very heavily in transparency, and this is an issue of transparency,” he added.