Though proposal activity is high, it seems like advisors and plan sponsors are reluctant to make a change. Could the new DOL conflict of interest rule be the culprit?
Anecdotal evidence from providers suggests that record keeper change has been down significantly in the first half of 2016 compared with a relatively robust 2015, especially for plans in the mid-market.
While the DOL rule may not dramatically change the way a company manages their DC plan, it promises to change the relationship with their service providers. While the relationship with the advisor may be most affected, it will also have implications with the record keeper, especially around education, which is a big hot button and differentiator. The most common advice given by experts to plan sponsors is to wait until they hear from their providers on what changes they are going to make before the sponsor reacts.
So if I’m a plan sponsor thinking about changing my record keeper or actively searching, and experts tell me that how I interact with my providers will change based on the DOL rule and how each provider responds, why would I be in a hurry to make a change when I may need to rethink things after the rule goes into effect? It’s not like anyone really enjoys changing providers anyway, and any reason to put it off may cause delay.
Markets most likely to be affected are plans with $3-$100 million. Smaller plans may be oblivious and larger ones are more thoughtful with greater resources to access what changes might take place.
And plan advisors may not be immune. Though the clients of fee based advisors already acting as a fiduciary may not see much change, other than a lot of paperwork, other plan sponsors may want to wait and see how their commissioned based advisor not able or willing to act as a fiduciary will respond. Because if everyone will have to act as a fiduciary anyway, there’s less reason to make a change.
What are you seeing?
Opinions expressed are those of the author, and do not necessarily reflect the views of NAPA or its members.
