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NEXT YEAR COULD bring interesting changes to the
defined contribution and retirement plan industry. Fee
disclosure may be taken to a whole new level with the
new, proposed Form 5500 reporting requirements, as it
relates to disclosing compensation and revenue sharing
arrangements. Proposed changes even call for sponsors to
identify any vendor who did not disclose either
compensation or revenue received from a third party. The
spirit of these changes is to monitor service provider
arrangements for “reasonableness”. Included in the
proposed reporting requirements are commissions,
compensation levels above $5,000 for anyone providing
service to the plan and disclosure of revenue sharing
and float arrangements. These proposed changes should
not be cause for alarm for two reasons: 1) they are only
proposed changes and 2) if enacted, this can be a key
opportunity for you to differentiate and grow your
business.
The value an adviser adds centers around how you can
help a sponsor meet their fiduciary responsibility.
Since a key responsibility is an annual plan review for
“reasonableness of fees and expenses,” including adviser
compensation, you can start to differentiate now, ahead
of any pending regulatory reporting requirements. While
87% of advisers in the 2006 DCP survey said they
disclose their compensation to sponsors, only 61% say
that sponsors understand what they pay to the adviser
and service provider. This means there is still work to
be done to educate sponsors and help them fulfill their
fiduciary responsibility to understand service provider
arrangements. Sponsors do not always know how to gather
the right information or ask the right questions, but
with guidance from a skilled adviser a sponsor can more
easily get the information required to make an informed
decision. Embracing this annual review and working
proactively with your clients will help you reinforce
your value to the plan, review plan activities and
milestones—and more importantly, review plan investments
and performance. By taking action now, your clients are
likely to perceive you as a leader by helping them meet
their fiduciary responsibilities.
For more information about TruSource and how we can help
you grow your retirement plan business, contact Frank
Bruno, Senior Vice President, at 800-274-8798.
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