The retirement industry had plenty to say about the Labor Department's updated fiduciary standard, unveiled April 6, after years in the making. The final rule, which requires anyone giving retirement investment advice to act in their client's best interests, included numerous changes to address earlier concerns. To gauge the impact of the rule, Pensions & Investments reached out to consultants, attorneys and industry representatives. Questions and comments have been edited for space and clarity. Please see related story on page 30.
On the spot: Experts react to fiduciary standard
Robyn Credico, senior consultant and defined contribution consulting leader, North America, for Willis Towers Watson PLC: “The rules for institutional plans are now better than the proposed rule. There will be no impact on large sponsors. The proposed rule was unclear. It made everyone very nervous.”
Richard McHugh, vice president, Washington affairs, Plan Sponsor Council of America: “In the overall context, I think they (DOL) came closer to solving the concerns that we had. They made things better. ... They added language that resolved our concerns. There is a fine line between what is education and what is advice. Sponsors want to know how much they can say.”
Edmund F. Murphy III, president, Empower Retirement: “The rule remains fairly complex. We are evaluating it. The department softened some of the language. ... There were some welcome changes, especially for asset allocation (models).”
Ross Bremen, partner, NEPC LLC: ”Plan sponsors can feel comfortable that their advisers will be fiduciaries and that they will get services from their service providers and record keepers like they did before. ... It seems positive.”
Julie Stapel, partner, Morgan, Lewis & Bockius LLP: “Generally, we expect the rule to have a significant impact on the retirement services industry overall, which will likely have various "runoff' effects on plan sponsors that we simply cannot yet anticipate.”
Scott Webster, partner, ERISA and executive compensation group, Goodwin Procter LLP: “I am telling sponsors to wait a bit to see how the industry acts” in regard to call-center operations, IRA rollovers and ongoing management.
Willis Towers Watson's Ms. Credico: ”Record keepers make it easy for participants to roll over.” If the fiduciary rule causes more paperwork, “maybe participants would keep their money in their plan.” “If the rollover money goes down, it could mean that record-keeping fees go up. … Rollovers can represent a fair amount of money” for record keepers. If the rollover income falls, “it could lead to reduced (profit) margins.”
William McClain, principal, Mercer: “Most sponsors haven't reviewed call-centers' scripts. We will see more reviews with sponsors having more oversight over these conversations. Sponsors will ask record keepers, 'What's their overall plan? What's their commitment?' They will want a better understanding of their business.”
James Fleckner, partner, chairman of the ERISA litigation practice at Goodwin Procter LLP: “It's still very, very complicated. Each (provider) has a different service delivery and each has different products. ... Our provider clients have to examine a wide range of activities that they are now engaged in to see what needs to be changed.”