The Fallout from Fee Disclosure continues

When I was fresh out of school and started my first job working for a third party administration (TPA), the paralegal that I was working with told me her experience with the retirement plan business that was pre-ERISA. Marge told me that every time there is change in the business (she was talking about the Tax Reform of 1986 in particular), there would be a number of plan providers that will just go out of business after struggling with the change.

That is how I felt about fee disclosure. You could look up some of my views on this blog in 2012 and how I predicted how some businesses would thrive and some would die because of fee disclosure. It was just common sense and my knowledge of business history that any seismic change in an industry will be a boon for some and a disaster for others.

For example according to a firm named NEPC, the median recordkeeping fee for a 401(k) participant was $116 in 2006. In 2013, it was $80 per participant. Technology probably has reduced some costs, but not by $36 a head.

Many big providers sold their business like Hartford, others like Schwab and Great West consolidated their operations. Many small providers merged or sold to competitors

The changes will continue as the fallout from 401(k) fee disclosure will continue.

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