Every few years, someone declares revenue sharing \u201cdead.\u201d And every few years, it stubbornly survives. Revenue sharing is still legal. It\u2019s still widely used. And yes, it\u2019s still dangerous\u2014especially for plan providers who don\u2019t explain it well.<\/p>\n
The risk isn\u2019t revenue sharing itself. The risk is how casually it\u2019s treated.<\/p>\n
Providers often assume that if revenue sharing is disclosed, the job is done. It\u2019s not. Disclosure doesn\u2019t equal understanding, and understanding doesn\u2019t equal prudence. Plaintiffs know this, which is why revenue sharing keeps showing up in complaints.<\/p>\n
Here\u2019s where providers get into trouble: they fail to help sponsors understand the tradeoffs. Revenue sharing can reduce explicit fees, but it can also distort investment selection, obscure true costs, and create cross-subsidies between participants. None of that is inherently illegal\u2014but all of it needs to be considered.<\/p>\n
A provider who presents revenue sharing as the easy option without discussing alternatives is doing their client\u2014and themselves\u2014no favors. Courts expect fiduciaries to evaluate fee structures. When providers gloss over that evaluation, they become part of the story.<\/p>\n
The smarter approach is transparency with context. Explain what revenue sharing does, what it costs, who benefits, and what other options exist. Then document that conversation.<\/p>\n
Revenue sharing isn\u2019t a villain. But it\u2019s not harmless either. Providers who treat it casually risk being seen as facilitators instead of advisors.<\/p>\n
And in ERISA litigation, that\u2019s a dangerous place to be.<\/p>\n
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