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Regulations bring transparency – and that’s a good thing in the retirement industry
Last Updated: February 01, 2012
To be opaque is to be in opposition to free enterprise. Why is it then that transparency is so often abandoned by the marketplace?
Consumers of all sorts need transparency to make good decisions; however, even with perfect transparency, not all will. Without it though, consumers are deprived of the resources needed to decide which products and services serve their best interest.
The retirement plan community is not immune from these natural forces. In fact, our industry, our chosen profession, is awash with examples of blurring meaningful information from those who are our consumers. Plan sponsors and fiduciaries have often had trouble understanding exactly who is paid what for plan services. Hiding the various charges or overstating the services to be provided is almost so common that it is unnoticeable.
Ditto for the plan participants. The typical employee has little understanding of what investment and administrative services they are paying. Added to that opaqueness are the motivations of the “advisers” guiding them towards retirement. How is an employee to know that the “adviser” is really only there to cross-sell them life insurance or to earn a commission for moving them to the managed account option in the plan?
In finally implementing the new 408(b)(2) and 404(a) regulations in the next few months, the Department of Labor is attempting to mandate transparency in the retirement plan marketplace. Most of the industry vendors will, no doubt, make a good faith effort to comply with both the letter and spirit of the new regulations, and for that the consumers will be better off.
Sure, there will be an adjustment period where we all adapt to the new information and the complicated processes that will ensue. But let’s not forget that more transparency is a good thing.
So, chalk one up for free enterprise. Soon things will be a little less opaque in our industry.
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