Comments on: A Conversation on 401(k) Advice vs. Guidance – PPA Fiduciary Adviser v. The DoL 96-1 Opinion

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By: Kevin Condon

Kevin Condon — Wed, 04 Aug 2010 21:54:50 +0000

No. But the subsidy has left the impression that advice is worth little. Since providing advice must be paid for, the product subsidy has to be replaced, probably from either the plan sponsor as an offset to the 12(b)1 savings, or from participant fund balances, or from both. We’ll all need to work it out.

There is no going back from fiduciary advice. But we have to deal with the pricing problem that will replace the old model. Advice provision wasn’t free then (even if people thought it was), and it won’t be free now.

By: Mel Srybnik

Mel Srybnik — Wed, 04 Aug 2010 19:50:13 +0000

Are you suggesting that hiding the fees again is the way we should go?

By: Kevin Condon

Kevin Condon — Wed, 04 Aug 2010 19:35:32 +0000

Wow. Excellent presentation of the problem.

We think that PPA 2006 “fiduciary advice” sessions can be templatized and modularized with data aggregation and delivery all on the web and phone, and have created a way to do it. Go to http://mfaworkplace.com to see the bones of the approach, presented to employers, benefits brokers and consultants for HSA advice sessions. Just substitute 401k on most pages to understand the approach.

The problem, of course, is what happened to the subsidy? Employers don’t know that their 12(b)1 fees were subsidizing the advice provision. If employees get advice ONLY, they will be shocked (shocked!) that they have to pay for it. So, TPAs and Administrators and plan document lawyers will need to automate advice provision fees from plan and participant balances and make the advice value proposition clear to all concerned. When you start talking turkey on advice versus guidance, cost will come up fast.

Who is working on and solving this problem? We can give the advice sessions very inexpensively. But, the provision of advice needs help in the contract and ERISA department for widespread use.

Anyone, anyone, anyone?
(Bueller?)

By: Skip Sorensen

Skip Sorensen — Wed, 04 Aug 2010 19:31:14 +0000

Excellent ideas! Thanks for sharing.

By: Mel Srybnik

Mel Srybnik — Wed, 04 Aug 2010 18:23:34 +0000

Great article. participants might also want to know their money personalities and advisers might also as well. It’s one thing to invest in a fund and another to sustain a strategy. The latter might yield a comfortable retirement while the former might lead to nothing. Knowing who you are financially and emotionally is the difference.

By: John Hartnesss

John Hartnesss — Wed, 04 Aug 2010 13:54:18 +0000

Great piece. Add TPA firms that provide access to funds and the party becomes even more fun.

By: Lynne McAuley

Lynne McAuley — Wed, 04 Aug 2010 00:06:55 +0000

Good article. Thanks for including all of the main reasons that plan sponsors are confused.

By: Ross Marino

Ross Marino — Tue, 03 Aug 2010 00:45:28 +0000

Excellent Q&A example with a sponsor. We have a long way to go as an industry trying to explain the differences between education and advice.

Even when we educate, and stress that it isn’t advice, it’s often received as advice by participants.