What do you think of our site upgrade?
Hosting an industry conference? Ask us about including it in this ticker?

5 Key Facts 401k Plan Sponsors Might Have Missed at the fi360 Conference

May 10
00:18 2011

This year San Antonio celebrates the 175th anniversary of the Battle of the Alamo, where 200 plus brave fighters, including former Congressman Davy Crockett, took one final stand to defend and promote the American ideal of freedom and honor. 1182571_99590542_five_fingered_hand_stock_xchng_royalty_free_300The epic struggle has found itself the subject of two Hollywood movies. Coincidentally, last week saw more than twice that number gather at the JW Marriott San Antonio Hill Country Resort and Spa to defend and promote the fiduciary ideal of duty and loyalty at fi360’s Annual Conference. Perhaps with historic irony, former Senator Christopher Dodd and now Hollywood lobbyist, provided the keynote for the event.

Fiduciary News spoke with fi360’s Senior Policy Analyst Duane Thompson about the conference. Among the more fascinating items he shared was Dodd’s keen ability to explain how the sausage was made in passing the Dodd-Frank Financial Reform Act. For example, at one point, Dodd, in providing his insider’s perspective, explained how one side preferred there be no capital reserve requirements on banks while the other side wanted 10%. The end result – 3% – didn’t come about from any analytical justification but, according to Dodd, because that’s the number they had the votes for. Maybe it’s just this blatant politicization and lack of empiricism that clarifies why the law remains controversial and may not receive the funding it needs. Unfortunately, none of the Congressional opposition attended the conference, so attendees were left with just a series of spell-binding historical vignettes one would expect from a movie industry supplicant, not with a real-time first-person report from an actual regulator or sitting legislator.

Nonetheless, what the conference lacked in meat for the keynote, it more than made up for in the body of the event. Indeed, after speaking with Thompson, it became clear there were at least five key points every 401k plan sponsor should know about their adviser that came out of the sessions. So, sit back, relax and enjoy the show as we reveal the 5 Key Facts 401k Plan Sponsors Might Have Missed at the fi360 Conference:

1. Pay attention to who ends up regulating Registered Investment Advisers (RIAs). Mercer Bullard, the Associate Professor of Law at the University of Mississippi School of Law who has come out with an alternate Self-Regulatory Organization (SRO) for independent RIAs, warned RIAs would have lower fiduciary standard if FINRA takes over as SRO. He promised his proposal would be more in line with ERISA, while FINRA would seem to rely on disclosures. FINRA, which wasn’t present to provide a response, currently acts as SRO for brokers. According to Bullard, there are 389,000 brokers, 34,000 independent RIAs and 242,000 dual registrants (those providing both broker and RIA services). The SEC currently regulates the independent IRAs and fears creating a uniform fiduciary standard will swell the number of registrants it must oversee (because the dual registrants will have to give up their brokerage business and become independent). Dodd-Frank asks the SEC to determine if it needs to appoint an SRO to handle regulation or if it can continue do it alone. Previously, the SEC has said it needs more money to regulate more advisers. It has not said it will opt for an SRO and surveys indicate most advisers prefer to remain regulated by the SEC, not an SRO. When the fiduciary definitions are finalized, plan sponsors will need to pay close attention to who regulates advisers. It won’t change the law or the rules, but it will suggest if the law or rules will really change.

2. Carefully read Section 8 of the new Form ADV Part 2. As profiled previous by Fiduciary News (“How Will New ADV Part 2 Help (or Hurt) 401k Plan Sponsors?Fiduciary News, March, 31, 2011), Ron Rhoades, JD, CFP®, Chief Compliance Office of Joseph Capital Management, showed how Section 8 of the New Form ADV Part 2a creates marketing opportunities for advisers. (It also creates liabilities if the RIA omits any discussion of risk.) Because Item 8 will probably get a lot of attention from regulators, it should also get a lot of attention from 401k plan sponsors. Be warned, though, ADV Part 2 does not cover disclosures required under 408(b)(2), the former being a broad disclosure and the latter being a specific disclosure for each plan.

3. Fiduciary duty does not mean “cheapest,” whereby service providers can only recommend and plan sponsors can only buy the cheapest securities available. Jim Patrick and Michael Koffler of Envestnet offered some sound advice: take it easy before creating simple-minded heuristics. There’s a lot of talk about fees, but some fees are more important than other fees. As a plan sponsor, you should know about all the fees, not just the fees that appear in any billing statement. For example, the speakers pointed out most mutual funds pay a fee to a broker to place their funds on that broker’s shelf. Do you know what that fee is?

4. If you’re picking an investment adviser that you hope will be around for a while, make sure they have a business plan. Centurion Consulting Group founder Barbara Lewis offered one of the most highly attended sessions at the conference. She pointed out that a service provider without any goals, without a vision or a mission, will be out of business sooner rather than later. “A plan sponsor is looking for a pro and a pro can articulate what his firm’s strategy is in a concise and precise manner,” said Kirk Francis, CFP®, AIF®, CEO at Cross Financial Services. He liked Umile’s session because it affirmed what he was doing.

5. Given the greater transparency on service provider fees (408(b)(2) beginning next year), 401k plan sponsors will be able to benchmark in a better way. ERISA attorney Fred Reish of Drinker Biddle & Reath, LLP, explained how, beginning January 1 of next year, plan sponsors must be able to document service provider fees or remove those service providers. The good news for 401k plan sponsors: it’s up to their service provider to provide those fee disclosures. The bad news for 401k plan sponsors, you’re fiduciary liability goes up if you continue to engage a service provider who does not comply with 408(b)(2). Plan sponsors should also be aware that said disclosures can be made through separate statements, not through updated agreements. In the end, the best news is we’ll likely see good reliable fee benchmarks within the next few years as this data becomes disclosed.

Overall, Thompson rated the 2011 fi360 Annual Conference a success. “I think numbers are a good quantitative measure of success and each year the number of attendees are growing,” said Thompson. He believes “it’s a sign that fiduciary issues are on the radar for a growing segment of society.” Francis agreed. He said, “there are three benefits you come out of these conference with: 1) The camaraderie of seeing old friends; 2) The networking opportunities to meet new people; and, 3) The one or two “ah-ha” moments you can immediately begin using.”

Thompson wasn’t able to say where the conference will be next year, but a fi360 spokesman did indicate the group does like to rotate locations. With this year’s conference being held in a southern venue, maybe a northern city (Buffalo? Pittsburgh? Rochester?) might be appropriate for next year.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


  1. Lynne McAuley
    Lynne McAuley May 10, 23:42


    I am sorry that I did not get to meet you at this year FI 360’s conference. Ben Aiken told me that you were looking for me. I read what you write regularly and enjoy both your writing style and perspective.


    Lynne McAuley

Only registered users can comment. Login is sponsored by…

Vote in our Poll


The materials at this web site are maintained for the sole purpose of providing general information about fiduciary law, tax accounting and investments and do not under any circumstances constitute legal, accounting or investment advice. You should not act or refrain from acting based on these materials without first obtaining the advice of an appropriate professional. Please carefully read the terms and conditions for using this site. This website contains links to third-party websites. We are not responsible for, and make no representations or endorsements with respect to, third-party websites, or with respect to any information, products or services that may be provided by or through such websites.