The manner in which Plan Sponsors receive their investment Advice is about to take a big turn over the next 18 months – and not all of the changes are documented among the DOL’s 1,000 plus pages of their new fiduciary rule. We know things will change for a variety of reasons – some controllable – and some not controllable.
Unsettling news revolves around Advisors who have serviced retirement plans for over twenty five plus years – who are being force to re-tool their processes and deliverables so they are able to comply with the sweeping changes as required by the DOL’s reform.
Change Will Be Driven by More Than Just the New Rule
Although the new DOL Rule addresses the new definition of who is operating as a fiduciary and what behaviors are expected of them; Advisors and their corresponding Plan Sponsor clients need to know that more is in play than just their current relationships.
Parent companies of the Advisors may surmise that the risk associated with remaining in the qualified retirement business is just too great. As reported in Investment News, more than 1/4 of financial advisers plan to exit industry or merge. Already, a number of organizations have made the decision to exit either the qualified retirement plan business or the Individual Retirement Account (IRA) business.
For those advisors who will be able to remain servicing the plan sponsor clients, exactly how an advisor services the plan sponsor and how advisors interact with plan participants will change dramatically. Advisors are expected to and required to implement new restrictions when working with plan sponsors and plan participants. New benchmarking requirements will be introduced into the IRA relationships.
It is anticipated that fees to Plan Sponsors will increase, services to smaller plans will evaporate and more plan participants will feel “left out” by an industry that can no longer afford to service the small and medium sized client.
