Answers to Top 10 Tough Compensation Questions

A guide from the Principal Financial Group helps advisers answer common plan sponsor questions about compensation.

As the one-year anniversary of the retirement plandisclosure regulation nears, financial professionals continue to face questions about the reasonableness of fees they charge. Answers are covered in “Top 10 Questions and Answersto Help You Address Changes to Section 408(b)(2) of ERISA.”

“The regulation sparked renewed interest in understanding the value received from service providers, including financial professionals, and that is a good thing,” said Tim Minard, senior vice president of distribution at The Principal. “We all want plan sponsors to understand the fees they pay. By being prepared to answer questions in advance, financial professionals can spend less time alleviating plan fiduciary concerns and more time working with clients to meet plan goals.”

The guide helps advisers prepare for questions they may receive as a covered service provider if the Department of Labor (DOL) audits the plan and asks the plan sponsor questions around compensation and reasonableness of the service arrangement. The different roles advisers play are clarified, and the guide helps to dispel misconceptions and explain the value of services. Advisers can use the guide to ensure that the fees their firms are charge are evaluated against those of comparable providers.


One of the 10 questions is: “Describe some of the variations in financial professional service levels. What is an example of a high service model? How might that contrast with a low service model?” The answer is that a high-service retirement plan adviser would help the plan sponsor develop an investment policy statement, monitor the plan’s investment options, provide fiduciary training and sit in on and support investment committee meetings.

Another question discusses the different ways a retirement plan adviser can be compensated; the answer is they are most commonly either fee-paid or commission-paid.

“The new DOL disclosure rules are an opportunity for financial professionals to reiterate the importance of the services they provide and ensure their fees remain competitive and transparent,” Minard said.

The guide can be downloaded here.