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 Industry
Insight from Fred Barstein
Regulating Qualified Plan Advisors
AS BRADFORD CAMPBELL from the Department of Labor
spoke at the recent SPARK Conference in Washington, DC, the
issue of advice under the Pension Protection Act of 2006 was
brought up once again. While the intent of Congress was to
provide advice to participants by qualified advisors, it has
done nothing more than confuse an area which was muddled to
begin with. And while Congress might be congratulated on
their efforts to help participants, there has never been an
effort to clarify what qualifies an advisor to provide
advice and guidance to plan sponsors which is arguably a
more important issue.
It could be argued that if a plan sponsor
diligently follows the PPA "guidance" on making the best
qualified advisor available to participants but does not do
the same for the plan, the advice provided will have no
chance of being successful. If the plan is poorly designed
and contains sub-par funds with high expenses wrapped in
hopelessly unreasonable fees, what chance does a participant
have of reaching their goal? Even Warren Buffet could not
help participants in some of the more flawed plans with
costs over 200 Basis Points and funds that are on the
platforms only because they pay high revenue sharing fees to
the record keeper. So where is Congress or the DoL when it
comes to either offering guidance to plans about what
constitutes a qualified plan advisor or, even better, where
are the penalties if plan sponsors fail to hire one? If
broker dealers try to hide under the ruse that their
representatives are not fiduciaries because they do not
provide advice, our question is what are they getting paid
for? Regardless of the form of payment, advisors are being
compensated to guide the plan sponsor to set up a retirement
plan that offers the participants the best opportunity to
accumulate enough assets to retire, and if the advisors do
not meet certain minimal requirements, there should be
repercussions.
Relying on Congress to get it right might
be wishful thinking – at the same SPARK Conference last
week, one of the staffers to Representative Miller’s
Education and Labor Committee admitted that the big
awakening in Washington was realizing that DC plans had
replaced DB as the most likely retirement vehicle for most
Americans. Talk about being out of touch. Expecting
providers or broker dealers to do the right thing by
squeezing out blind squirrels in ERISA plans which might
hurt them economically in the short run is too much to hope
for. So our only real hope is that experienced retirement
advisors continue to gain market share at the expense of
blind squirrels and direct sold plans. While record keepers
and most broker dealers are rooting for these advisors to
succeed, don’t expect them to do anything meaningful or
overt.
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