Finalization of the Department of Labor’s (DOL) proposed fiduciary rule will place new responsibilities on sponsors of 401(k) plans to determine the extent of service they want from retirement plan providers, says Douglas Fisher, senior vice president of policy development at Fidelity.
Fisher, who spoke with our sister site, BenefitsPro, in between meetings on Capitol Hill last week, said no one can predict with certainty how the rule will affect the recordkeeping market, or how participants and sponsors will pay to have their plans administered going forward.
“Fees for recordkeeping and money management have been going down — that’s happening regardless of the DOL rule,” says Fisher.
As of last year, Fidelity had $2.8 trillion in retirement assets under administration, according to its website.
A one-time aid to the Senate Finance Committee, Fisher said he does not expect Fidelity to be impacted by potential restrictions on propriety investment products in DOL’s final rule, because its recordkeeping services are built on open architecture investment platforms.
Nor does he think the rule will require recordkeepers to charge sponsors on a flat fee-per-participant basis, despite what he says may be the DOL’s intended bias.
“ERISA (Employee Retirement Income Security Act) provides a fair amount of flexibility for all of the options” on how participants and sponsors pay for recordkeeping, he says.
No matter the specifics of the finalized rule, Fisher said Fidelity’s singular goal will be to continue to supply a “rich suite of services” and the “robust education” sponsors want to deliver to participants.
Over the past year, Fidelity’s cadre of ERISA experts has centered its attention on articulating to regulators the critical value recordkeepers bring to enhancing participant engagement. “Without those services, you can not have a well-functioning, compliant plan,” says Fisher.
Fisher could be said to be guardedly optimistic that regulators have fully weighted industry’s input, but he is not without lingering concerns.
“I don’t know that the regulators have a full appreciation for what goes into keeping a plan in compliance,” says Fisher. “Industry spends tens of millions helping participants become more financially educated.”
Like other stakeholders, he fears that the DOL has been “blindly driven” by the question of fees, which Fisher said could result in discounting the important value that recordkeepers and advisors provide sponsors and participants.
“The retirement plan is the sole source of financial education most workers get,” he says, underscoring the role recordkeepers play as educators to a large swath of the nation’s retirement savers.
Beyond the degree to which the rule will limit record keepers’ education initiatives — Fisher and others point to the question of whether model portfolio information will fall under the rule’s interpretation of fiduciary advice — Fidelity is focused on several other areas of the finalized rule’s language.