SURVEY SAYS: How're You Feeling About the New Advice Guidance?

February 8, 2007 ( - Last Friday, the Employee Benefits Security Administration (EBSA) issued some additional guidance regarding participant advice in the form of a Field Assistance Bulletin, or FAB.

The FAB dealt with how advice providers are supposed to be monitored, plan sponsor liability for that advice, and how the Pension Protection Act’s new fiduciary adviser provisions fit within the context of existing regulations on the subject of participant advice.   This week I asked readers how that guidance was sitting with their current stance on participant advice.

For most of this week’s respondents, the guidance wasn’t having any impact at all.   More than one in five ( 21% ) said that it contained “no surprises” for them (though one cautioned, “That being said, the last 5 years in this industry showed that, regardless of laws and regulations, a good lawyer will beat it anytime! Eventually you will see lawsuits against the plan sponsor for failure to monitor the investment advice provider!” while another 32% said it had no impact for the simple reason that they aren’t currently offering participant advice.   Among them was the reader who noted, “These rules have gotten so complex.   There’s going to be so much CYA going on in the service contracts.   I’m sure someone will figure out how to create an affiliate that can claim to be an adviser to get the business, yet not be an adviser so they 1) won’t be a fiduciary and 2) charge whatever they want for their own investments.   The clients that sign up won’t know what hit them until the participants lose their shirts, then find out they have no recourse.”

Feeling Better

Fifteen percent said it had no immediate impact – but that it made them feel better about offering participant advice.   One reader in this category noted, “No immediate impact, but we feel better about offering participant advice. Especially online advice and the computer modeling requirements.   We are in negotiations with a vendor, and hope to have this implemented within the next year.” 

Among the 5% who said they already offered advice and found it reassuring was the reader who said, “I feel like there’s always been a bit too much gray area when it comes to what a fiduciary’s responsibility is when functions are outsourced.   For example, have I done my job if I selected prudently, even if the provider makes poor judgments?   Or is it my job to micromanage everything the provider does since, after all, I am the fiduciary?   I think this bulletin makes it clear that your job is to select prudently…period…and that pleases me very much.”

No one currently offering advice expressed any concerns, but 10% of this week’s respondents acknowledged that, while they currently offer advice, they hadn’t yet read the guidance – and a matching 10% said they weren’t even aware there WAS guidance, while the remaining 7% opted for “other.”

This week’s Editor’s Choice came from the last group, noting, “What good is governmental advice?   They will only change it later and hold us responsible for having not already followed what they were going to decide to change to later.”

Thanks to everyone who participated in our survey!

Those of you who HAVEN’T read up on the guidance, see ” DoL Sets Out New Advice Guidelines .”  You can also check out my take on what it says/means:   IMHO: A Little “Free” Advice.