While the retirement industry, lawmakers and the courts seem myopically focused on fiduciary issues, the question is what do DC plan sponsors think, and what are they doing in reaction to what seems like daily headlines on the issue?
From the DOL’s proposed rule redefining who is a fiduciary to the recent Tibble v. Edison U.S. Supreme Court case, to pronouncements from the SEC, the White House and Congress, it’s clear that DC plans are mainstream issues headed by the fiduciary issue. But what’s on the mind of plan sponsors?
First, let’s level set on what market we’re talking about. If you read industry and even popular press, or surveys by institutional consultants, you will only be getting the view of larger plans, which have dedicated staff and sometimes legal counsel working on their DC plans. But most advisors are dealing with plans where the HR and benefits people take the lead, with final decision making by the CFO and/or the CEO/business owner. Meanwhile, the HR person is juggling 10 different jobs. So when you ask most of these people what the difference between a 3(21) and 3(38) fiduciary is, the most common answer is “17.”
It’s hard for some advisors who have spent the last 5 to 10 years touting how they can act as a plan fiduciary (and how their competition cannot) to get off that bandwagon and listen to what their clients and prospects are actually saying and how they are reacting. It’s actually more important to an advisor’s broker dealer whether they are acting as a plan fiduciary than it is to most plan sponsors.
After conducting nearly 100 The Plan Sponsor University (TPSU) programs since 2013, with more than 1,500 plan sponsors in attendance, my observation is that what most plans are concerned about boils down to two basic issues:
- Is their plan in compliance (in other words, would they pass a DOL audit)?
- What are other plans like theirs doing?
The scare tactics and finger pointing of advisors who are willing and able to act as plan fiduciaries will only go so far, and will attract a limited and undesirable clientele. Better to explain how you can help clients stay in compliance (with a dash of thought leadership and stewardship) and tell stories about what other clients like them are doing, than to proudly declare that you can act as a fiduciary. Does anyone really think that works anymore?
