I was told by a financial advisor that he had a $3 million prospect that is currently being serviced by a broker on an insurance company platform. The plan has been on this platform for over 10 years. If the plan decides to change the platform, they will take a $130,000 charge from the insurance company. Yes, $130,000 in charges.
Clearly, the broker has socked the plan with a platform that really does not suit their needs as the alternatives laid out with the same insurance company provider is high in fees as well.
There are plans like this everyday, who are paying too much in fees or unaware of any hidden charges should they decide to change providers. This is why we have fee disclosure coming in April 2012, to curb these type of abuses.
My old college newspaper had the tagline of “Let Each Become Aware”. This is what fee disclosure is all about, it’s the release of information. Information is power as long as plan sponsors use it and use it that will best serve the needs of plan participants. I anticipate eagerly the implementation of fee disclosure. As I stated in my speech at Schwab Impact in San Francisco a few weeks back, I have no idea what fee disclosure will bring to the marketplace. There may be some good things it brings and there may be some bad things it brings like my law of unintended consequences. Then again, it may have no effect like the calorie disclosure of meals at fast food restaurants.