The Frugal Fiduciary Blog

Asset-Based 401k Admin Fees Are Unreasonable; Fiduciaries Should Avoid Them

Posted by Eric Droblyen on Oct 19, 2016

20 years ago, 401k plans were free. OK not really, but 401k providers used this lie a lot to sell 401k plans to small businesses that didn’t want to pay any out-of-pocket 401k fees. In truth, these plans paid “indirect” fees - like revenue sharing paid by mutual funds and/or wrap fees paid by insurance company variable annuities – to 401k providers based on a percentage of plan assets.   

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Topics: fiduciary, asset-based fees, 401k fees

401k Fiduciary Pro Tip: Uninvested Cash Can Be a Symptom of a Bad 401k Recordkeeper

Posted by Eric Droblyen on Aug 10, 2016

401k recordkeepers are like icebergs – you can only see a small fraction of the services they provide. Behind the scenes, they can process tens, if not hundreds, of transactions every day for a 401k plan related to contributions, distributions, inter-fund transfers or fee payments. This transaction volume makes 401k recordkeeping complicated, requiring specialized expertise to do it well.

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Topics: fiduciary, small business 401k, 401(k)

The DOL’s New Fiduciary Rule – the Value of 401k Investment Services Will Be More Critical Than Ever

Posted by Eric Droblyen on Apr 20, 2016

On April 6, the Department of Labor finalized its long-awaited fiduciary rule for retirement plan investment advice. Under this rule, all financial advisors to retirement plans are required to act according to a “fiduciary” standard – in other words, they must give impartial investment advice that’s in their clients' best interest. Prior to this rule, only some advisors were subject to a fiduciary standard. Brokers and insurance agents were subject to a lesser “suitability” standard.

The problem with the suitability standard is that there is practically no investment that is “unsuitable.”   Hidden fees, outrageous redemption charges, lousy performance and house funds with high commission payouts – everything is suitable and anything goes. The old standard allows for certain advisors to provide financial “products” that give the appearance of unbiased advice, but in reality represent blatant conflicts of interest.

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Topics: fiduciary, 401(k)

Happy Holidays from the Frugal Fiduciary! Our Top 10 Blogs of 2015

Posted by Eric Droblyen on Dec 30, 2015

Happy Holidays! As 2015 comes to a close, we looked back through this year’s blogs to find the most read. This process was instructive. We learned our most popular blogs were the ones written to simplify 401k administration or fiduciary requirements for employers. You can expect more blogs covering these topics during 2016.

So, in case you missed them the first time, or just want a refresher, here are our top 10 most read blogs of 2015.

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Topics: fiduciary, 401(k)

Understanding a 401k Plan’s Fiduciary Hierarchy Can Make It Easier for Employers To Meet Fiduciary Responsibilities

Posted by Eric Droblyen on Dec 16, 2015

Over the past decade, several high-profile 401k fee lawsuits and DOL efforts to implement a fiduciary standard for professional investment advice have put 401k fiduciary responsibility in the national spotlight.  This attention has done little to help employers understand and meet their 401k fiduciary responsibilities.  Most employers are still confused and risking personal liability if 401k fiduciary responsibilities are not met.  Understanding fiduciary roles and responsibilities is key to addressing the issue.

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Topics: fiduciary, 401k fees

Avoiding 401k Fiduciary Liability Doesn’t Need to Be Difficult; Simple “Best Practices” are the Key

Posted by Eric Droblyen on Aug 26, 2015

My favorite guiding principle is Occam’s razor, which defines as “the maxim that assumptions introduced to explain a thing must not be multiplied beyond necessity.”  I don’t know many 401k professionals that value Occam’s razor as much as I do.  In fact, I think many actually favor overwrought and overly expensive solutions to 401k issues.  I guess this probably makes a lot of sense from a business standpoint.  After all, it’s easier to justify a higher fee for a complicated 401k solution than a simple one.

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Topics: fiduciary, 401k fees, 401(k)

Watered-Down Fiduciary Rule May be the Best Case Scenario for Investors

Posted by Eric Droblyen on Apr 22, 2015

On April 14, 2015, the DOL proposed its long-awaited fiduciary rule designed to protect retirement plan savers from conflicted investment advice. A fiduciary rule was originally proposed in 2010, but it was withdrawn the following year in response to industry opposition. The stakes are high. According to a White House Council of Economic Advisers analysis, conflicts of interest cost retirement plan investors $17 billion per year.

Like the 2010 proposal, the 2015 proposal generally requires financial advisors serving retirement plans and IRAs to operate in a fiduciary capacity, putting the interests of their clients before their own. However, the 2015 proposal adds several new carve-outs and exemptions not found in the 2010 proposal. 

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Topics: fiduciary, 401(k) Investments

DOL’s Fiduciary Rule Advances to OMB; Not Everyone is Happy about It

Posted by Eric Droblyen on Mar 4, 2015

On February 23, 2015, President Obama announced that the long-awaited redrafting of the DOL’s “fiduciary rule” was being submitted to the Office of Management and Budget (OMB) for review. This rule, also called the “conflict of interest rule for investment advice,” would subject all financial advisors who provide investment advice to retirement plans to a fiduciary (conflict-free) standard of care.

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Topics: fiduciary, 401k blog, small business 401k, DOL

NAPA stakes a position against the DOL’s fiduciary rule

Posted by Eric Droblyen on Jan 26, 2015

This month, the DOL is expected to propose a “fiduciary rule” for financial advisors that provide investment advice to retirement plans. This rule, also called the “conflict of interest rule for investment advice,” would subject brokers to the same fiduciary obligations as investment advisers. The DOL proposed a fiduciary rule in 2010, but that proposal was withdrawn in 2011 under heavy pressure from some lawmakers and lobbyists representing the financial services industry.
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Topics: retirement plans, fiduciary, 401k blog, DOL, 401(k) advisors

New Year’s Resolution # 1 for Fiduciaries – “I WILL Evaluate My 401k Plan Fees"

Posted by Eric Droblyen on Dec 30, 2014

I have always liked New Year's resolutions. They are a great excuse for ending bad behaviors or starting good ones. Here’s one for all small business 401k sponsors – “I will evaluate my plan fees for reasonableness.” Let me explain why…
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Topics: 401k plan sponsor, fiduciary, ERISA, 401k blog, 401k fees, 401(k), DOL

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