Heighten Regulation and Executive
Ignorance: A Bad Combination
Pension & Investment reports that many executives are “clueless” about the plans they oversee, DC Execs Clueless About Key Plan Data.
The P&I article is shocking. Survey data reveals that on multiple levels Plan Execs don’t know the nuts & bolts of the business of running and administering their plans. And, worse, some have just “thrown-up their hands”.
In many cases these execs are plan fiduciaries, or advise plan fiduciaries. The problem is that plan fiduciaries can’t just “throw-up their hands”.
And yet, the role of overseeing retirement plans keeps getting more complex and sophisticated, not less.
The Investment Company Institute just reported that as of Q3, 2011, total US retirement assets were $17 trillion. That is a big pool of assets against which various service providers can charge fees.
As the financial services industry has exploded over the past decades, the Department of Labor has finally focused the spot light on the fees and expenses charged against plans. New regulations go into effect this summer under which plan fiduciaries must approve the reasonableness of fees and expense charged to plans.
Notsurprisingly, these regulations are very intricate and complicated. In effect, the regulations reflect the elaborate fee structures and business models which have evolved enabling various service providers to increase their revenue streams from retirement plans.
And so, a “perfect storm”, rages. Complexity increases, the government is demanding greater oversight, and key executives and fiduciaries remain ignorant on basic facts and details with respect to the plans they oversee.
Of course consultants stand ready to advise plan executives and fiduciaries. But, before the consultants can provide advice, the plan executives and fiduciaries MUST understand the business models for administering their plans. Otherwise, the advice is being delivered into a vacuum. How can one evaluate the advice if they don’t even understand the basic features and terms of their plans and do not understand the business of administering a plan?
At Harrison Fiduciary Group, we are proponents of an entirely new model for the delivery of fiduciary services. With respect to Fees & Expenses, we are experts. Our combined 30+ years in the retirement-industry has provided us with the experience and knowledge to analyze plan structures and the related fees. The devil is in the details, and we understand the details.
By delegating this authority to HFG, plan executives and fiduciaries will not have to become experts on an area that bears little impact on their core business competency.
Perfect storms need to be heeded wisely. Allowing ignorant plan execs and fiduciaries to make significant fiduciary decisions can lead to disasters.