Why 408(b)(2) is a flop for the 401(k) business and how RIAs can turn it around
The disclosure requirement sat around so long that workarounds got developed and employers got comfortable in the boiling water
BAM Advisor Services
Top Executive: Mont Levy
Here is one of my favorite lines from a 34 page 408(b)(2) report from an insurance provider that I just read the other day.
“We want you to know that additional compensation creates a potential conflict of interest in the form of an additional financial incentive for us to include a Fund on our Investment Option Menus and/or undertake more focused marketing for that Fund, as compared to other Fund.”
That should be framed.
408(b) 2 has not been a flop. The Big record keepers clearly can not meet the new reporting requirements, creating opportunity for those innovators who can. It is not a question of ignoring the statutory requirements essential to anyone who renders advice to 401(k) plans. There are highly coveted solutions in the space presently in the process of a bidding war from our largest institutions.
Heaven help those that are not aggressively trying to manage to the now required outcome.
The requirement still exists—it represents market share which will be lost for those that cannot adapt to include the largest and least nimble players in the business.