I finally, albeit reluctantly, opened the statement and couldn’t help but feel something was missing. But I’m getting ahead of myself. Let me start at the beginning.
For a long time I never told people what I really did for a living. We asked my profession, I usually answered “aspiring novelist.” It wasn’t because I was ashamed of investment management. It was because of those awful questions that would ensue.
It’s kind of like if you’re at a party, and someone says they’re a magician. Invariably, somebody asks him to do “his favorite trick” and, pretty soon, he’s surrounded by everyone wondering why he isn’t getting paid.
I quickly discovered the same thing. I really hated when they asked me for my best stock tip. Luckily, I knew enough compliance jargon to convince the curious inquisitors I couldn’t speak about work with non-clients. A quick allusion to insider trading or fiduciary obligation was enough to scare most over to the magician in the room.
Nowadays, and maybe this means something, I don’t know, nobody asks about stocks anymore. Now they ask about their 401(k). Here’s what happens: After I tell them I’m an aspiring novelist, they ask the logical question, “Have you written anything?” I tell them. It doesn’t help my case that the name of the book is “401(k) Fiduciary Solutions.” That immediately blows my cover.
And so they ask me to take a quick look at their statement. I’m too old to fight, so I gently smile, take a look, and say some innocuous thing that makes people think I have no idea how to give advice. That’s the strategy.
Spend a long time talking without ever giving an opinion. That usually works. They usually never ask me again. It’s like the magician who pulls out his hat, tells a lot of punny jokes, and keeps telling them, never pulling the rabbit out. Frustrating, right?
Well, speaking of frustrating, I can’t tell you how frustrated I was the other day. I was at a friend’s house and we’re talking about the election, the economy and the plight of the Buffalo Bills. Then – and don’t ask me how to connect the dots – he out-of-the-blue says he’s never had anyone look at his and his wife’s 401(k) selections. He knows I’ve written about the subject and casually wonders if I’d be willing to take a look. I gently smile and, what can I say, they’re my friends.
So, finally, albeit reluctantly, I open the statements. They’re through September 30th, 2012. It doesn’t matter that one is from a big Fortune 100 firm and the other is from a big 401(k) service provider. They both contain the same usual mix of dozens of mutual funds, a mix of active and passive.
They both had a disturbing large array of target date funds, although one mislabeled them “lifestyle” funds (there’s a difference and, if you don’t know what it is, send me a note and I’ll write an article on it). The 401(k) service provider’s statement included the standard 12b-1 funds. The large firm contained company stock. In total, nothing surprising.
Except for this.
Neither statement contained anything about the fees my friends paid. I later called a recordkeeper friend of mine who confirmed, as of August, any participant statement is required to include fee information identified not as a mere percentage (like an expense ratio), but as a specifically dollar amount calculated for that individual participant.
Houston, we have a problem. (Or, more appropriately: DOL, we don’t have a template!)
The question is “what to do about it?” A better question might be “Is Fee Disclosure working?” Several industry experts and the DOL give their opinions in the article “401(k) Fee Disclosure: What 6 Months Tells Us.”
But it’s apparent the DOL’s new Fiduciary Disclosure Rule has fallen on deaf ears of at least one Fortune 100 firm and one very large service provider. I asked my friends. They hadn’t heard of the rule and didn’t know to expect such disclosure. Worse, they didn’t seem to care, focusing, as always, on the investments, not the fees, not if they’re saving enough, in other words, not the things they can control.
Oh, well. They’re no different than the typical 401(k) participant who believes more in the magic of investing than the science of saving.
I’d like to see a rule that addresses that.
For more from Chris Carosa, see also: