401(k) plan sponsors are increasingly hiring fiduciary advisers

The DOL fiduciary rule and excessive-fee lawsuits are combining to raise the profile of fiduciary retirement plan advisers

Feb 13, 2018 @ 3:00 am

By Greg Iacurci

Employers sponsoring a 401(k) plan, especially small business owners, are increasingly hiring investment advisers who serve as fiduciaries to their retirement plan, new research suggests.

About 70% of all 401(k) plans used an independent investment adviser — separate from the plan's record keeper — to assist with fiduciary responsibility in 2016, according to a new study from the Plan Sponsor Council of America. That's up about 3 percentage points over 2013.

"There's been a focus on fiduciary responsibility in light of all the lawsuits and the fiduciary rule," Hattie Greenan, the PSCA's director of research, said. "I don't think it's surprising we see an increased use of plan sponsors using independent, outside advice."

The trend is most pronounced among smaller plan sponsors, PSCA data shows. 401(k) plans with between 50 and 199 participants saw use of fiduciary advisers swell 10 percentage points, to 67% of plans, from 2013 to 2016.

Similarly, plans with between 200 and 999 participants saw growth of 8 percentage points, to 77%; the smallest plans (1-49 participants) got a boost of 7 points, to 59%.

Lawsuits attacking employers for allegedly high 401(k) fees have proliferated over the past few years. Such lawsuits have claimed employers breached their fiduciary duty by allowing participants to be overcharged for services such as administration and investment management.

These fee lawsuits have primarily targeted the largest employers — those whose retirement plans have billions of dollars in assets — but speculation has mounted that litigation will come down market to smaller plan sponsors with more regularity.

Further contributing to the trend is the Department of Labor's fiduciary rule, which increases investment-advice standards in retirement accounts and was issued in April 2016. National debate on the regulation and coverage of it in mainstream media combined to further raise the profile of the term "fiduciary" and advisers who provide fiduciary advice.

The rule partially went into effect in June 2017, instantly turning thousands of brokers, who'd been servicing 401(k) clients as non-fiduciaries, into fiduciary advisers.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

What it took to win an Excellence in Diversity & Inclusion Award

Editor Fred Gabriel and special projects editor Liz Skinner explain how InvestmentNews chose the winners of our inaugural Excellence in Diversity & Inclusion Awards.

Latest news & opinion

SEC slaps Lockwood with $200,000 fine over unseen trading costs to clients

Clients were forced to pay fees in addition to the usual wrap charges, the regulator maintains.

Gotcha! 10 lessons from brokers gone bad

These cases show why regulators nabbed reps and firms, and how to avoid their fate.

Tax-credit investigation may trip up Wells Fargo

Justice Department is investigating bank's dealings in tax credits for low-income housing, sources say.

10 biggest boomtowns in America

These metro areas are seeing the biggest influx of people, work opportunities and business growth.

SEC ponders creating video to help investors decide between investment adviser and broker

Chairman Jay Clayton has suggested the host on the video would deliver similar information as conveyed on disclosure Form CRS.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print