It may not immediately strike small business owners that they may not have complete control or access to their own retirement assets that sit within the company plan they sponsor. After reading this, they may have second thoughts about taking any unvetted actions.
Conflicts of Interest
Regulators (including the DOL) seem intent on splitting the baby in half by allowing two incompatible business models – one fiduciary with no self-dealing fees, the other non-fiduciary with conflict-of-interest fees – to coexist within the same market. Does this mean “fiduciary” has lost its inherent advantage?
Was “fiduciary” done in by over-saturation? Or was it the victim of a super successful negative campaign? Or is there something missing in our analysis?
Still, others remain cautious, especially given the novelty of the idea and the fact it remains untested.
Plan sponsors shouldn’t let these three common fee foibles expose them to unnecessary fiduciary liability.
The definition of “conflict-of-interest” has become so broadly defined as to render it useless. It’s better to focus on the one conflict-of-interest that, with very limited exceptions, fiduciaries have had to outright ban for centuries. Ironically, in contrast to this precedent, it remains the one conflict-of-interest the DOL expressly permits.
Be careful what you wish for because sometimes the cure can be worse than the disease.
It will be important for 401k plan sponsors to get down and dirty when it comes to understanding the fiduciary liability implications of “clean” shares and their equivalent. Furthermore, since the most successful class action suits have involved different share classes of the same fund, you can be sure the introduction of “clean” shares will catch the eyes of your not-so-friendly neighborhood class action attorney.
Just because the new Rule won’t be enforced until January doesn’t mean retirement savers can’t take advantage of it. This does, however, require individuals become self-reliance and look out for their own good. But how is that any different for all other consumer decisions?
“Hopefully,” says Reese, “this past year gave employers a better understanding of what they need to look out for to act as fiduciaries for their plan participants.”
