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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

Author Guest Columnist Scott Pritchard April 10, 2013 at 5:23 PM
no description available
Scott Pritchard: Wall Street lawyers had plenty of time between 2007 and last July to create slight-of-hand ways to "disclose" these fees without providing meaningful transparency.

401(k) Stories


RIA Compliance

Chris W.

Chris W.

April 11, 2013 — 7:22 PM

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.”

Brooke Southall

Brooke Southall

April 11, 2013 — 7:25 PM


That should be framed.


Stephen Winks

Stephen Winks

April 12, 2013 — 6:59 PM

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.


Mentioned in this article:

BAM Advisor Services
Top Executive: Mont Levy

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