You cannot understate the fiduciary aspect of lower fees. Most 401k plan sponsors, and especially those in smaller plans, don’t have the time or expertise to administer their company’s retirement plan. If they skimp on fees, are they also skimping on the fiduciary protection those professionals are supposed to provide?
Tag "Marcia Wagner"
There might be a there, there. It could be that TDFs have an Achilles’ Heel that leaves them vulnerable.
The conflicts-of-interest inherent in selecting proprietary funds are apparent. Less so are the criteria used to determine what a suitable process might be.
Thoughtleaders with the veteran experience to sift through the noise and separate the wheat of solid trends from the chaff of tiresome fads. Accurately discerning between the two can mean the difference between long-term sustainability and irretrievably sunk costs.
Unlike a generic vendor agreement, the IPS is a formal plan policy document that defines the parameters between the plan and relevant vendors. This is why it can also be a terrible trap.
Whether a plan sponsor decides to adopt a 401k IPS remains an open question. It’s not a question that should be treated casually. Every plan situation is different. Plan sponsors therefore must conduct a thorough due diligence to determine what’s best for their plan.
Although we’ve seen a broader acceptance of using an IPS, their use is by no means universal and particularly lacking among smaller employers. Perhaps there’s a realization that, if you don’t get the IPS right, you’ll only increase your liability.
Still, if one has confidence the marketplace will drive the industry towards focusing on the best interests of clients, then a de facto fiduciary standard can emerge organically, without overt reliance on regulators.
In the final analysis, we may get the best of both worlds, a reduced regulatory compliance burden with a market that imposes the fiduciary standard.
Any regulation that requires 10 pages of explanation for every page of regulation is bound to have something good, something not-quite-good-enough, and something not-so-good.
