It’s amazing what you learn at networking events. I was at one the other evening. As others imbibed their adult beverages, I stood, as usual, alone, sipping my Diet Pepsi. An industry friend spies me and walks on over, keen for some shop talk. I tell him about some of the newer things I’m doing and he, well, he was loaded for bear. He had to get something off his chest, but, in a room full of realtors, placement firm recruiters and the usual cadre of small mom & pop business owners, he needed to find someone “in the biz,” someone who could empathize with his dilemma. After only a few words, I knew where he was going.
The fellow services 401k plans. He’s a plan fiduciary, a good guy. He’s mainly working the 3(38) side of things. He had just come from a client meeting and the CEO was livid. Like most CEOs, he engages his own private investment adviser. He was quite surprised to learn he was paying such a “large” amount for “investment advice” in his 401k account. The CEO rightfully claimed he neither was receiving nor wanted to receive any investment advice. He was happy with his private investment adviser, thank you very much.
Understand my friend’s quandary. He had just shaved 25% off of the plan’s expenses, yet the CEO was complaining about fees for a service not provided by the plan. The CEO recognized the savings, but insisted he was paying for investment advice he didn’t want. And the CEO was demanding the fees be eliminated.
Of course – and you know where this was going – the fees listed on the CEO’s participant statement (and every other participant statement) were incorrectly labeled as “investment advisor” fees. They were actually the plan’s fiduciary adviser fee. (The difference in spelling is lost to most professionals, let alone sophisticated investors like the CEO.) Maria Wagner addressed this very problem in a recent interview (“Exclusive Interview: Omnipresent Maria Wagner on All Things ERISA,” FiduciaryNews.com, December 17, 2013).
What Your Peers Are Reading
It’s a problem many honest fiduciary advisers are finding themselves victimized by. But the problem is much worse than that. A year after the DOL’s 401k Fee Disclosure Rule, a 2013 Limra study shows 50 percent of retirement plan participants still don’t know what they pay and, worse yet, 40 percent still think their 401k is free. What gives? What’s the cause? And what can be done about it?