Before you stop reading in disgust of the notion that the market is controlled by accidental parties, consider first the sponsors. While some larger plans are getting it right and have assigned the appropriate resource to manage their retirement plans, they are in the vast minority – perhaps less than 5% of all DC plans. If larger plans were really doing a good job, then lawyers would not be circling. Most smaller plan sponsors look at their DC plan as a convenience at best and nuisance at worst. Espousing a Taoist attitude, they want nothing – no cost, no liability and no work. While participants have more at stake, who would argue that they are anything but accidental investors?

Advisors are more attentive and professional but by even the most optimistic estimates, less than 10% of all plans in the under $10 million employ an experienced retirement advisor. Consider the blind squirrel servicing the other 90% that sponsors rely on to make up for their lack of knowledge and interest or the 25% of the plans that don’t even have an advisor. How many undergo a comprehensive and documented analysis of the record-keeping market when considering the needs of their lone sponsor client to select their vendor? How many have created an Investment Policy Statement with quarterly monitoring reports? How many periodically review the plan and expenses making needed adjustments as the plan, sponsor and market changes at an alarming pace? How many advisors work with participants to give them a better chance of accumulating enough assets to retire and then offer solutions to help them spend it wisely? Consider the broker dealers who are supposed to offer support –less than 25 or 1% have dedicated significant resources and personnel and most of these groups will tell you that what they have is not enough and diminishing.

Providers focused on retirement (record keepers, IOs and TPAs) are the only group with the will, expertise and the resources needed to help sponsors and participants to be successful as the weaker and ill conceived providers get weeded out by market forces. But trusting the future of retirement to this group, especially the big national providers attached to larger financial service companies which have their own agendas is not the answer, which is why Congress and the DoL are proposing such extreme measures. Scaring sponsors into doing the right thing holds little promise, while weeding out blind squirrels is a very slow process. Relying on participants may be naïve. So, like all “big bang” theories, there will have to be a confluence of events that make it attractive for some knowledgeable and well funded groups to lead the charge. Ironically, the bigger providers now resisting change but that are able to adjust quickly will be the big benefactors just as larger companies adjusted and ultimately leveraged the Internet after initially resisting it. 

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