Retirement Plan Sponsors, and the fiduciaries who support the company retirement plans, have the difficult task of balancing among Plan Participant needs, Company needs, Advisor needs and Investment Provider needs. This has never been simple but over the years an increasing number of plan fiduciaries have sharpened their skills to make it work. As we have learned through The Plan Sponsor University (TPSU) Fiduciary Education Programs delivered at colleges and universities across the country, Retirement Committees and Benefit Committees are fine-tuning the way they manage plans, plan assets and the human capital of an organization. What could possibly go wrong?
New Research Paints a Not-so-Rosy Picture
Recently, Phoenix Marketing International, a global marketing services firm based in Rhinebeck, New York released a new study the results of which indicate there is a lack of Trust on the part of the 401k plan investor. A summary of the research findings can be found here.
The research reflects over 40% of plan participants, with a sample-size of 2,626, are questioning the accuracy and transparency of the performance figures that is being furnished on the plan.
Topics addressed include:
Fee Disclosure;
Returns compared with other advisors;
Returns compared with other investors; and
Return measures compared to benchmarks.
Findings are Groundbreaking
Some of the findings of this study are surprising. Surprising since there has been very little published on the topic of plan participant Trust. The concern being that there may be inaccuracies in the reported performance numbers and fee disclosure documentation of qualified plans.
Since investment performance results are regulated (and audited) by the Securities and Exchange Commission it seems unlikely that Registered Investment Advisors would take the risk associated with intentionally being less than accurate when reporting investment performance. The risk of not being fully transparent on fees associated with a qualified retirement plans would create a Reg. 408(b)2 infraction, which would be a Department of Labor violation.
As surprising as the research findings appear, if the findings represent plan participant perception or reality, then knowing that there is a communication failure occurring with plan participants is very valuable. Surprising results should not be ignored or refuted just because they do not confirm your own belief. Such research may just be a harbinger of what may soon become our norm.
