The Frugal Fiduciary Blog

Fee Study of 525 401(k) Financial Advisors – Why Trump Can’t Reverse Tide of Fiduciary Advice

Posted by Eric Droblyen on Apr 5, 2017

This week, the DOL delayed the effective date of its Fiduciary Rule – which would define all retirement plan financial advisors as ERISA fiduciaries, effectively banning conflicted 401(k) investment advice that puts advisor profit ahead of client interests – by 60 days from April 10, 2017 to June 9, 2017.  The delay was triggered by a memorandum from President Trump that directed the agency to complete a new analysis of the rule’s likely economic impact.

As a critic of the Fiduciary Rule, it’s a good bet that President Trump ordered the DOL analysis to build a case for overturning it. If that happens, it would be a huge (yuge?) victory win for brokers and insurance agents – who are currently non-fiduciaries. According to a study from the White House Council of Economic Advisers (CEA), these advisors rake in more than $17 billion in excess fees annually due to conflicted advice.

If you are a supporter of the Fiduciary Rule like me, it can be easy to be upset by the Trump administration delay. However, I’m not worried about it. Even if this ban on conflicted retirement plan advice is squashed, I am confident the die is cast. Following several high-profile excessive fee lawsuits, more 401(k) plan sponsors than ever are hiring fiduciary-grade financial advisors to lower their liability. The kicker? Their impartial advice is often cheaper than potentially-conflicted, non-fiduciary advice. And I have the numbers to prove it!

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Topics: Fiduciary Responsibiilty, 401k fees, DOL Fiduciary Rule, Provider Shopping, 401k Studies, Financial Advice

The Top 4 Lies Told by 401(k) Providers

Posted by Eric Droblyen on Mar 22, 2017

After the death of his beloved mother, Harry Houdini was desperate to contact her from beyond the grave with the help of psychic mediums – who claimed an ability to communicate with the dead. Mediums were very popular at the time, but it didn’t take long for Harry to discover they couldn’t do what they promised. Upset, Harry became determined to expose their lies to protect unwitting customers.

Like mediums, some 401(k) providers make false claims. Their lies can easily go unnoticed to 401(k) fiduciaries due to the highly-technical nature of 401(k) services. However, believing these lies – and hiring the provider that makes them – can trigger severe consequences. They often mask excessive 401(k) fees or a lack of expertise that can increase fiduciary liability.

If you’re a 401(k) fiduciary, identifying 401(k) provider lies is imperative to mitigating your plan liability. The good news? Most are easily debunked with some basic facts.

I’d like to channel (pun intended) Harry Houdini by exposing four of the most common lies told by 401(k) providers today.

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Topics: Revenue Sharing, Fiduciary Responsibiilty, 401k fees, Provider Shopping, Plan Setup

401(k) Fees – Frequently Asked Questions by Plan Fiduciaries

Posted by Eric Droblyen on Mar 8, 2017

Small businesses that sponsor a 401k plan have a fiduciary responsibility to only pay necessary and reasonable fees from plan assets. Keeping 401k plan fees in check is one of the most important fiduciary responsibilities because excessive fees reduce investment returns unnecessarily, making a comfortable retirement for plan participants less affordable. Not meeting this responsibility can also mean severe consequences for plan fiduciaries – including personal liability.

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Topics: 401k fees, Provider Shopping

4 Traits of the Best Small Business 401k Providers

Posted by Eric Droblyen on Jan 11, 2017

There are thousands of 401k providers in the U.S. – many with very different fees, services and expertise. This abundance of choice can make choosing a competent 401k provider with reasonable fees seem overwhelming for small business 401k fiduciaries.

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Topics: Provider Shopping

401k Fees: Are Traditional 401k Services Worth a Smaller Retirement Nest Egg?

Posted by Eric Droblyen on Nov 16, 2016

I have a confession – my company’s participant benefit statements are nothing special.  While they disclose all the requisite information, they are matter-of-fact and lack color graphics.  They’re also delivered electronically, not mailed.

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Topics: 401k fees, Provider Shopping

You Want to Terminate Your Multiple Employer 401k Plan? Good Luck with That

Posted by Eric Droblyen on Nov 2, 2016

Small business 401k plan terminations can happen for reasons other than going-out-of-business or a business sale.  Sometimes, even successful businesses decide to terminate their plan due to a cash crunch or poor employee participation.

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Topics: Provider Shopping

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: Revenue Sharing, 401k fees, Provider Shopping

3 Questions for Calculating Small Business 401k Provider Fees

Posted by Eric Droblyen on Oct 5, 2016

Small businesses have a fiduciary responsibility to pay only reasonable 401k plan fees. The problem? Too many 401k providers bury their fees in complex disclosure documents. When 401k fees are hard to find, it can be easy for 401k fiduciaries to pay too much for 401k services. When this happens, participant returns are handicapped unnecessarily and fiduciary liability is increased.

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Topics: Revenue Sharing, 401k fees, Provider Shopping

Is Human 401k Advice More Expensive Than Robo Advice? You Might Be Surprised

Posted by Eric Droblyen on Sep 7, 2016

A new development in the small business 401k industry is the “robo” 401k provider. These providers use a computer algorithm, instead of a flesh and blood financial advisor, to construct investment portfolios for 401k participants. They claim technology is a less expensive alternative to human advice.

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Topics: 401k fees, Provider Shopping, Financial Advice

(Possibly) The Biggest Small Business 401k Fee Study Ever!

Posted by Eric Droblyen on Aug 24, 2016

Table with person working on 401k study

Meaningful 401k fee data is hard to come by – and that’s a big problem for small businesses. Sponsors of small business 401k plans have a fiduciary responsibility to keep 401k fees reasonable for plan participants. When this responsibility is not met, the consequences for 401k fiduciaries can be severe - including personal liability.

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Topics: Revenue Sharing, 401k fees, Provider Shopping, 401k Studies

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