I remember when Honda unveiled their new Acura line of cars in 1986 and how the cars where befuddled with problems and I remember when IPhones had antenna issues. While we would like new products and services to be released without any issues, some things are a work in progress.
There have been many issues concerning 401(k) fee disclosures since disclosures to plan sponsors and participants were made mandatory. When you have had a 30+ year old industry cloaked in fees, a transition to transparency wasn’t going to be easy.
A recent study of 500 small-business owners, commissioned by ShareBuilder, found that 80% of those who remembered seeing the disclosures still had questions after reading them. That means everyone in the 401(k) industry has some work to do.
While I have been a firm supporter of fee disclosure, I do see some issues. I think the disclosures could be more reader friendly, but that will take the Department of Labor time to tinker with it. I think there has still some issues that need to be work out on the plan sponsor disclosures. I do believe that some of the providers offering wrap products or annuity products may have some outs in disclosing all the fees. It’s great that a plan sponsor can see what their financial advisor and third party administrator (TPA) make in fees, but I think there are still some gray areas revolving around wrap products and even model portfolios where plan sponsors may not see all the fees that are out there.
In addition, we need to further educate plan sponsors on their responsibilities in analyzing the fee disclosure information they receive as well as the need to benchmark. What good is fee disclosure if plan sponsors use them to wrap fish or put it in the back of the drawer. It’s a work in progress and we should all work on it until it gets done right.