DOL Intensifying Scrutiny Of Advisor Retirement Plan Fees

Adding to the DOL intensity is the personal attachment that long-time staffers have to the regulations after spending years developing them.

“They are very invested in the rules. DOL has concerns that financial advisors and other service providers are not providing individualized plan-level fee disclosures, but instead are providing generic fee disclosures that do not provide plan fiduciaries with the disclosure they need under the rules,” says employee benefits lawyer Emily Peterson.

Erisa Advisory Council member Kaleda recently detailed the compensation project's process for advisors at a seminar at the National Society of Compliance Professionals' annual conference.

When a project investigation starts, EBSA first notifies an advisor of an investigation with a letter or a phone call followed by a letter.

The letter includes a case number, names the company or individual(s) under investigation, details EBSA’s authority to investigate the matter and requests documents.

Information the investigators initially seek from the documents includes ownership and structure of the advisory firm and the name and description of every product sold to each Erisa plan participant.

In addition, the investigators are after documents disclosing services and products provided and sold to each plan client with contact information for each client’s administrator, trustee and contact person.

EBSA also seeks the fiduciary status the advisor has with each of its Erisa clients and a current statement of all assets held by the advisor for each plan client with the name of the asset and its fair market value.

Other information being sought includes documents on revenue sharing and a list of all funds the advisor has sold or managed year to year.

In interviewing the RIA’s staff, investigators allow the employees to have legal counsel present.

After an inquiry, EBSA investigators sent the advisor a closing letter.

If violations are found, the agency will outline violations and typically issue what is called a “Voluntary Compliance Letter.”

Investor advocate Ric Edelman called the EBSA initiative a positive development.

“I’m glad to see they’re focusing on it. Too many employers are 'sold' plans by insurance agents and stock brokers -- and the employers don’t realize the costs of the investment choices in the plans, or the conflicts of interest that exist,” Edelman said.