Fund Fees on Statements

Well, we are about 2 years into the Fee Disclosure initiative for employer based retirement plans. The Department of Labor has raised legitimate concerns that the requirements haven’t worked – or at least as well as intended – since they are too complicated and lengthy for real people to understand.  Industry practitioners can argue this based upon their viewpoint and experience.  My attitude is that it has not worked at all – or its effect has been very minimal, with almost no impact on smaller employers.  As I talk with plan fiduciaries and participants, they are, generally speaking, still unaware of plan fees.

My recommendation is that if the DOL really wants to get the attention of plan participants, require that all fund fees be calculated and printed on each quarterly statement!  And these need to be specific to each account.  Some plan fees are already presented – like our firm’s advisory charges. This is great – I fully support it. But if the actual investment fees were on statements, that would get the consumer’s attention.  Some reactions might be, “What the @#$ is this charge?” or “Where did this come from?” or “You’ve got to be kidding?”

These numbers would shock many plan participants.  Then it will be up to the fiduciary and the investment providers to justify these fees.  So be it.  It is appropriate for every business to justify their fees.  This single step would go a long way towards eliminating the unnecessary intermediaries that profit in the retirement plan marketplace and get rid of some fat in the financial services industry.

And when the next bear market arrives, these fees would really get the attention of participants!