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Advisers and sponsors should explain to participants that if investment choices are made based on fees only, it could result in a portfolio that is not diversified. Many participants, however, will not look at fees on their statements, Winegrad predicts. Regardless, it is still important to explain the changes that will occur after the regulation goes into effect. “With this type of stuff, if you can be proactive, it’s much better,” he said. Winegrad suggests plan sponsors schedule meetings before the regulation goes into effect or have participants call plan advisers directly about fee disclosure questions. “That can be a way for the plan sponsor to unburden themselves from that workload,” he said, although he acknowledged that some participants do not have access to the adviser. Kristi Mitchem, senior managing director and head of Global Defined Contribution for State Street Global Advisors, said plan sponsors can help participants understand the context of their fees by comparing them with industry averages. Sponsors and advisers can also help participants calculate their fees, Mitchem added. The Department of Labor’s (DOL’s) template requires participants to do math to determine what they are paying because the fees are expressed both as a percentage of assets and as a dollar amount per $1,000 invested. “The majority of employees aren’t going to do [the math],” said Tom Gonnella, executive vice president, corporate development at Lincoln Trust Co. He suggests sponsors request from providers a more user-friendly fee disclosure template than the DOL’s, so participants do not have to calculate their fees.
Advisers and sponsors should explain to participants that if investment choices are made based on fees only, it could result in a portfolio that is not diversified.
Many participants, however, will not look at fees on their statements, Winegrad predicts. Regardless, it is still important to explain the changes that will occur after the regulation goes into effect. “With this type of stuff, if you can be proactive, it’s much better,” he said.
Winegrad suggests plan sponsors schedule meetings before the regulation goes into effect or have participants call plan advisers directly about fee disclosure questions. “That can be a way for the plan sponsor to unburden themselves from that workload,” he said, although he acknowledged that some participants do not have access to the adviser.
Kristi Mitchem, senior managing director and head of Global Defined Contribution for State Street Global Advisors, said plan sponsors can help participants understand the context of their fees by comparing them with industry averages.
Sponsors and advisers can also help participants calculate their fees, Mitchem added. The Department of Labor’s (DOL’s) template requires participants to do math to determine what they are paying because the fees are expressed both as a percentage of assets and as a dollar amount per $1,000 invested.
“The majority of employees aren’t going to do [the math],” said Tom Gonnella, executive vice president, corporate development at Lincoln Trust Co.
He suggests sponsors request from providers a more user-friendly fee disclosure template than the DOL’s, so participants do not have to calculate their fees.
Corie Russelleditors@plansponsor.com