A Glimpse Toward Anticipated Trends
Plan Sponsors should anticipate favorable fallout from the new Department of Labor (DOL) regulation which centers around the new definition of fiduciary status for retirement plan advisors. Although domestic financial markets are skittish, as the international community focuses on terrorism, coup d’états and Brexit, the United States remains the safest haven for invest-able dollars. This all benefits the 401(k) plan investor. Not only is the plan participant positioned for success but plan sponsors have been handed a gift from the DOL.
The Horizon is a Tapestry of Lower fees and Professional Specialization
As described by David Macchia in Fiduciary’s Big Silver Lining, 401(k)Plan Sponsors can anticipate three areas where improvements will occur as unintended consequences of the DOL’s new definition of the plan fiduciary.
The first gift, is the lowering of plan related fees. Although the real conversation should have focused upon risk management and disclosure – the lowering of plan-related fees is an area where service providers are focusing. The DOL has referenced Robo-solutions as a strategy where-by plan sponsors can manage plan expenses. More money is now shifting toward ETFs and indexing while asset managers are simultaneously succumbing to the pressure to lower fees.
The second gift, comes in the form of Income Planning – an area where traditional advisors have been less than stellar. (Each plan sponsor should turn inward, and ask themselves and posit to the Retirement or Benefits Committee – How well has our plan advisor accomplished an overall strategy for plan participants’ Income Planning?) In most cases better Income Planning means consolidating (moving) assets from one advisor to another advisor.
The third gift, surfaces as specialist Advisors emerge in the discipline of Income Distribution. Once assets are assembled and retirement is either anticipated or has begun, the sequencing of returns looms large. (If retirement years’ annual returns were smoothed to 8.5% returns year-over-year there would be no need for such specialist advisors. However; the distribution of returns has proven to be anything but smooth, creating the need for an Income Distribution professional.
These three gifts from the DOL’s new Fiduciary Rule should help all plan sponsors and plan participants over the next few years.
