Whatever happens in the never-ending (and maddening) fiduciary rule saga, the momentum from 401(k) commissions to fees is on—and growing stronger. Ascensus, which claims the mantle as the nation’s largest independent retirement plan and college savings services provider, reported that data from its record keeping platform finds the use of fee-based compensation models continues to grow among 401(k) financial advisors.
According to Ascensus data, only 19 percent of the new plans on its platform had a fee-for-service compensation structure in 2011.
In 2017, more than three quarters of new plans on its platform fall into the fee-for-service category. The push for more transparent pricing—that is, pricing that allows clients to easily understand exactly which services they’re paying for—leads it to believe that more advisors will also look to convert their existing businesses from commission- to fee-based models.
The Pennsylvania-based company recently found itself at the center of another issue who’s future under President Trump is less than certain; state-sponsored 401(k)s and IRAs.
The Oregon Retirement Savings Plan, which claims to be the first state-run 401(k) plan, named Ascensus as its provider.
The plan’s board conducted a public request for proposals last fall for a firm to manage the account records, operate the website, and receive and process the retirement payments. The plan would be available to those Oregonians who lack a 401k plan option at work.
That is, until a pair of congressman introduced joint resolutions in February to block the advancement of state-run 401(k)s and similar retirement plans, taking specific exception to the ERISA safe harbor exemptions such plans would employ.
Rep. Tim Walberg, R-Michigan, and Rep. Francis Rooney, R-Florida, claim state-run proposals and plans would “jeopardize small business retirement plans, put taxpayers at risk, and undermine the retirement security of working families.”
“In the final months of the Obama administration, the Department of Labor (DOL) created a regulatory loophole that will ultimately force workers into government-run Individual Retirement Accounts (IRAs) without the consumer protections provided by the Employee Retirement Income Security Act (ERISA),” according to H. J. Res 66 and H. J. Res 67.
They further allege that “Concerns have been raised that the department’s actions will discourage small businesses from offering private-sector plans and leave working families with less retirement security, inadequate safeguards, and limited control over their retirement savings.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
