Ideally both consumers and businesses would benefit. In reality, alliances of competitors with similar products, services, and value propositions rarely work. For one thing there is the concern that these systems are often open to abuses, like price collusion, which enrich suppliers at greater cost to consumers. Hence, we have strong antitrust laws.
The bigger challenge in a profit-motivated economy is imagining a business being satisfied with its share of the “cooperative” when profits could be enhanced by competing. After all, competition is what drives capitalism. This competition represents a special challenge for the 403(b) world.
The final 403(b) regulations place significant new reporting and fiduciary responsibilities on sponsors. For 403(b) plans with assets held by more than one provider, coordination of data held by competing firms is necessary in order to comply. Even single-provider plans usually have legacy assets with prior providers. The plan sponsor bears the heavy burden of trying coordinate collection of needed information from competing providers.
Recognizing the magnitude of this challenge, the Society for Professional Administrators and Record Keepers (SPARK) developed a standardized format to share data between a provider and a plan sponsor. Since plan sponsors aren’t equipped to handle this much data, it became a standard to be applied among providers—providers that are competitors. Great ideal, but can it really work in practice? No. What incentive does a provider have to share client information with competitors when competitors could use that information to go after the clients?