December 12, 2011
--- What will be the top four regulatory items for financial advisers to deal with in 2012? Josh Cohen and Ben Jones of Russell Investments shared their thoughts. ---
The first set of issues involves fee disclosure, which includes disclosures from sponsors to participants and from providers to sponsors.
“We’re not anticipating a major impact from the sponsor to participant disclosures. Many sponsors already disclose these fees to participants. This just formalizes it a little more, maybe puts them in a new format,” said Cohen, defined contribution practice leader at Russell Investments, in a conversation with PLANADVISER. And if more participants notice the fees, Cohen believes some will recognize the value in investing through the plan and receiving institutional-level fees, rather than investing on their own and paying higher fees.
The bigger impact, he says, will be 408(b)(2), disclosures from providers to sponsors. “This will shed a much brighter light on all the fees being paid. And what’s key is that the sponsors are going to have to do something with all this new information.”
That’s where advisers come into play, said Jones, director, defined contribution for Russell’s DCIO adviser-sold business. Advisers will have to help sponsors evaluate and benchmark these fees. Jones explained that Russell categorizes advisers into two broad groups: specialists and generalists. He expects specialists to see substantial business growth as a result of 408(b)(2), particularly in the middle market. Their expertise will become an even more important value-add to clients.
However, Jones also said he disagrees with some reports that predict an end to generalists working with retirement plans. He said there are simply not nearly enough specialists to work with all defined contribution plans in the entire country, especially in the small or micro-plan markets. He predicts generalists “will embrace the new rules and evolve their processes to improve client experience and clearly communicate what their value adds to the table.” It will involve a lot of outsourcing, he added, because it will be hard for them to meet all the needs of all their plans.