Yield of Dreams

Stressed Over Fee Disclosure? Look to Service Providers for Templates

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Fee_DisclosureStarting April 1, 2012, advisors are going to have to disclose fees for their services to retirement plan sponsors, according to changes to the ERISA rules. Advisor fees to retirement plan fiduciaries have gone unnoticed for decades because their compensation comes out of the service providers’ compensation. “All they know is that this guy shows up,” said Lou Harvey, founder and leader of DALBAR, a financial services market research firm.

But some service providers are making the new disclosure process easier, building templates that include the fee disclosure information required by the rules. Great-West Retirement Services is the first to roll out its template this week, but Harvey said others are working on it. Great-West worked with DALBAR on the template design and to certify its compliance. Other firms are also seeking the certification.

Great-West stopped by our offices recently to show us the template, and explain how this might impact advisors. According to Charlie Nelson, president of Great-West Retirement Services, the firm actually built the template to go above and beyond what’s required by the DOL:

With that goal in mind, we combined almost all fee disclosure information into a single, comprehensive document, and even disclosed certain fees not required by the new regulation. We surpassed other requirements as well. For example, the regulation doesn’t require a service provider to show fees in dollars and percentages instead of formulas; however, we provide our disclosure in both dollars and percentages. This way, the information is more understandable for plan sponsors. We also provide a summary of fees as well as a detailed breakdown by category.

In the past, advisor fees have not really been laid out for plan sponsors, and I believe this will cause a few plans to do a double take. Some will ask themselves, ‘What am I paying for?' or 'Do I really need this?’

Harvey is working with reps on spelling out what services they are providing and the steps they take to keep plan sponsors in compliance and add value. DALBAR has created templates for reps that include a set of services they provide in a language plan sponsors can relate to.

He says there are a number of service providers that are trying their best to stay under the radar and not highlight their fees, although he would not say which firms are doing this. In my opinion, reps would do best to not associate with these providers, especially when there are those like Great-West that are going above and beyond with their level of transparency. They’re not afraid to put it all out there. It would also be wise for reps to seek out companies to work with that have these templates because they’re going to make their lives a lot easier, especially those that just dabble in the retirement plan business.

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