When Eliot Spitzer was campaigning for the Governor of New York, he was well known in his role as a tough as nails Attorney General. In his campaign ads for Governor, Spitzer claimed that on “Day 1, everything changes”.
Having been a follower of New York state politics, I knew that Spitzer was going to a flop because he was too arrogant. Anything who knows anything about what goes on in Albany knows that very little changes, especially in one day as Spitzer promised. Change takes time; it takes tweaking; it takes trial and error. Of course, Spitzer lasted about 14 months as Governor because of his penchant for his prostitutes.
I’m sure than when fee disclosure regulations for retirement plans were finally implemented last July, many people thought that also on Day 1, everything was going to change. Fee disclosure is a game changer for the retirement plan industry, but it’s a change that will take time.
There needs to be tweaking as the Department of Labor (DOL) is noticing that most plan sponsors don’t understand the jargon of the disclosures. The DOL is considering adding a guide requirement so that plan providers can explain the fees in the fee disclosures that were supposed to explain the fees. The plan providers who used to hide the expenses they were receiving are still getting away with it, by just disclosing their inflated fees.
Most of all, plan sponsors need to be trained over time to expect these fee disclosures and the need for them to benchmark their fees. Like the usage rate of seat belts in New York, it took over 20 years for 90% New York drivers to use seatbelts even thought it’s the law (rate of usage right before the law was 16%). It will take quite a but of time for plan sponsors to understand disclosures and what to do with them.
Fee disclosures will have a profound effect on the retirement plan industry; it will just take more than a Day to change everything.