Disclosure – Build Credibility with Your Clients

datePosted on 15:33, June 15th, 2010 by lee

The mainstream media is ranting on about the new 401k Fee disclosure rules. “Finally, we are saved!” 

Without a doubt, the majority of plan sponsors have no idea what they are paying in fees, so the government is going to force the providers to tell them. The first thing plan sponsors will learn if an employee sues them for “breach of fiduciary duty” is what they have been paying in fees. Those that don’t know will not have a leg to stand on. The rules don’t state what the fees should be but that fiduciaries have an obligation to know what they are and that they are reasonable.

Last year the 401k Safe Investment Committee went through the process with IFLC (Investment Fiduciary Leadership Council) of complying with proposed regulations. As an advisor you build tremendous credibility with clients and prospects when you make it clear to your client that he or she has an obligation to know what fees are being billed out of the plan, who they are being paid to, and confirm that fees being charged are reasonable. Is this easy? In most cases no. The new regulations will definitely make it easier, but the question is do you want to be forced into this discussion with your clients or do you initiate the conversation.

When talking about fees, plan sponsors routinely tell us “my advisor handles that.” You will build credibility telling your clients it’s not your job to “handle that.”  Your client is the only neutral party in the transaction, it’s his job as the fiduciary of his employees’ money to know what he is paying and that it’s reasonable.

401k Safe is different in that we actually have liability as Sponsor, Administrator, and Fiduciary of the plan. It is in my best interest to “Know.”


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