“What to Expect in 2011?” More Education and Fee Disclosure

In the opening panel discussion at the PLANADVISER National Conference (PANC) in Orlando on Monday, four panelists discussed the need for more participant education and the evolution of adviser compensation.

According to the four opening panelists at PANC, 2011 is going to be a busy year for plan advisers.

“You have to design [the plan] around the client and demographic….plan sponsors are holding you accountable for participant involvement and engagement; for driving that strategy.  What kind of education will you offer, what kind of communication, you need to drive that conversation.  Put it in writing, show results, be accountable for participant services,” clear words from Denise Diana, Vice President, Middle Market Leader at the Hartford.

Diana, along with the other panelists, repeatedly emphasized the importance of educating plan participants in order for them to be more engaged in the retirement planning process.  She also said that participants are getting “noisier” and “more realistic.”  They realize that longevity management should be a concern of theirs, but due to the economic upheaval of late, participants continue to make conservative investment choices.

“We need to go forward again, get [the participants] out of the very conservative options and get them ready for retirement,” Diana said.

With such a clear need for education, why are so many participants still uneducated about the process?   

Rick Wedge, Retirement Plan Practice Leader at Northgate Benefits, says it’s often the employers’ fault.

“I think education is being offered, but not enough sponsors take us up on the offers.‘Oh it’s a bad time for us…’ The employer is preventing education,” he said.  (This point was later refuted at a panel featuring plan sponsors.)   


Wedge even said that on two occasions, he ultimately decided not to work with a plan sponsor client because they were refusing to accept any educational programs for participants – this is not something he would do lightly, he said. The alternative to turning a client away would be to offer automatic enrollment, but even that requires a minimal amount of participant education.

The panel briefly touched on the sensitive area of differentiating between education and advice.  Wedge said he thinks they are one in the same - “I tell them where to put their money.  We’re fiduciaries, and by law, have to do what’s best for them.”

Handling Transparency 

The other major topic that arose in the panel, “What to Expect in 2011,” were the issues surrounding fee transparency and adviser compensation.   

All of the panelists said the demand for transparency is growing and that ultimately, it will be a good thing.

Kenneth Cochrane, Managing Director of Pulse Logic, a market data and analysis firm for financial services, said that increased transparency will increase specialization and best practices.  He predicted that generalists will be forced out and that “regulation is good for professionals.”

In his latest survey at Pulse Logic, Cochrane found that 85% of plan advisers expect their revenues to grow in the coming year.  Half believe that fee-disclosure legislation will cause them or their clients to review plans, and the majority feel it will create new opportunities.

However, like so many other professionals in today’s tough economic times, Cochrane reminded the audience of a few hundred financial advisers that, “You, like everyone else, will be asked to do more for less.”