Advice to advisors in a post-fee disclosure world

5 Tips to help reduce the backlash and support greater participant success

by Charlie Epstein

Mr. Epstein, CLU, ChFC, AIF® is the founder of The 401k Coach® Program, which offers expert training for financial professionals to develop the skills, systems and processes necessary to excel in the 401(k) industry and facilitate successful retirement outcomes for plan sponsors and participants. He is the author of the book, Paychecks for Life®, which offers nine Principles for participants to turn their 401(k) plans into a secure retirement income. Visit   the401kcoach


As participants begin to delve into the new breakdown of their retirement plans, advisors need ways to reduce the backlash and support greater participant success.  As a rule of thumb, over-communicating is better than the alternative. Employees will appreciate you, and better yet, many will be more willing than ever to meet with you to discuss their personal financial planning. In the end, you will get paid more for your actions, not less!

Here are five simple tips:

Get out in front of the noise
There is a lot of press swirling about, that employees are paying too much for their 401k plan or the 401k plan is broken. While you may think thats nonsense ( and so do I. 401k plan fees have been dropping 25-50% across the country), you need to get out to your 401k employers and make them all aware of the pending DOL 405(a) Participant fee disclosure. Let employers know what it means and what they may expect from their employees reactions. Let them know how their 401k record keeper plans to communicate these fees and in what format.

If your current plans do not offer lower cost index funds in each asset category, add them immediately.

RFP: If you haven’t put your 401k plans out to bid in the last 3 years, you best do so now
401k Plan fees and expenses have been dropping 25-50%. Depending on your plans size, you may be able to save the employer and employees 25-50% (if not more) in expenses! Make sure you do this and not your competition.

Add Low Cost Index /ETF Funds
If your current plans do not offer lower cost index funds in each asset category, add them immediately. In large fee disclosure litigation cases, the courts have ruled in favor of the plaintiffs (Plan Sponsor Fiduciaries)especially when a 401k plan offered both active (higher cost )and passive (lower cost)fund options to all employees. Translation: It’s tough to argue when a plan offers a wide range of investment choices.

Talk to employees
Tell the Plan Sponsor employer it is critical that you meet with employees, both in groups and one-on-one to make them aware of the fee disclosure and its impact on their retirement savings.

Update your Service Agreement and Fee disclosure statements
As an advisor to a 401k plan, you need to communicate; 1. the services you provide, 2. the fees you will receive for providing those services, both hard and soft dollar fees, 3. whether you will be a fiduciary to the plan , and 4. if you have any conflicts of interest. Now is the time to update and/ or create a service agreement.