Leveling the Playing Field

“When’s the last time you met someone who said they wanted to be treated unfairly?”
Photography by Matt Teuten

“When’s the last time you met someone who said they wanted to be treated unfairly?” The question is rhetorical. But the point Peter Gordon, President of Retirement Plan Services at John Hancock, was making is very real.

“You wouldn’t pay for your co-worker’s coffee, lunch or parking every day,” said Gordon. “But because of the way many 401(k) recordkeeping systems were created, people may have been unknowingly paying for their colleagues’ 401(k) recordkeeping costs for years. We think we’ve found a better way—one that includes fairness, transparency and levelized allocation of plan costs, paid through investments for all participants in a plan regardless of their investment choice.”

PLANADVISER recently discussed with Gordon the inside story about how John Hancock is tackling this topic and why. “We are focused on putting participants first, and our core values continue to be in line with the original mandate of the 401(k) and centered around one essential commitment: to help participants realize the retirement future they’ve promised themselves,” Gordon said.

Leading with fairness and transparency

Gordon was referring to a new investment platform and pricing model John Hancock launched this past spring, one the company says offers a uniform way to allocate plan expenses among participants, regardless of their investment selections.

Fee disclosure regulations such as 408(b)(2) had a dramatic impact on the industry, pulling back the curtain on 401(k) plan service costs. Rather than seeing this new reporting as a burden, Gordon said, John Hancock saw this as an opportunity to stake out a leadership role on fairness and transparency with its enhanced investment and pricing platform.

“The fee disclosure regulations were just the beginning,” he said. “We believe the next big thing in the industry is to focus on how the cost of plan services is being allocated to plan participants and to make it equitable across all investments. Both our JH Signature and JH Enterprise retirement plan platforms are ideally suited to deliver this in elegant and transparent ways, so we think we are very well positioned to lead
this change.”

Disclosure is a good thing

Gordon noted that his company’s JH Signature platform provides advisers with a way to offer plan sponsors a solution to a very real challenge, especially in the smaller end of the market where many plans may lack the scale and sophistication to address the allocation of costs effectively in the same ways as large and jumbo plans. “This is a very powerful conversation starter for advisers,” he said. “To be able to highlight the fact that the costs of plan services may not be uniformly allocated across all participants provides advisers with a real opportunity to continue to illustrate their value to existing clients and to set themselves apart from other advisers when competing for new business.”