Obfuscation Nation: 401(k) fee disclosure laws still don't give the true cost of plans and may well cause more agita for would-be retirees
The new DOL rules are far from ideal but may give fee-based advisors an edge in the small-plan market
Elmer Rich III
Let us offer and additional perspective.
- The 401k (DC) system is brand new in societies around the world. The 1st generation of folks is getting ready to retire using it.
- No one EVER expected it to be so big an successful. In fact, most financial services firms and leaders dismissed it as a joke when it started. I know, I was in those meetings.
- It has gotten very big and complex and fast growing and with increasing velocity.
- Disclosure issues with so many options, at an individual level, balanced to the penny, everyday are really complicated.
- It’s going to take some trial and error to find approaches that work.
As financial services always does, instead of testing different approaches before releasing them to the market, the industry approach is throw a bunch of stuff out and see what works or doesn’t. It would make sense to thoughtfully and carefully test approaches across firms and the industry then stepwise release and pilot in the market — but that ain’t gonna happen in the US.
There is certainly a common utility approach that could be developed using the latest educational and learning, communications science, etc. But that ain’t gonna happen either.
It’s dum to take a hodgepodge, jury-rigged approach to fee communications but that’s the legacy (sales-driven) culture of our industry.
In fact, we have a pilot start-up where we are applying the best science to education on retirement matters with retirees, of all ages. You can learn more at www.retirementscholar.com. Disclosure in retirement is no different from in medicine, and other professional matters. Stay tuned.