Plan Sponsors React to Retirement Advice Legislation
EMERYVILLE, CA, July 27, 2006 -- The McHenry Group, LLC today released an urgent client alert addressing the results of a market survey on the likely response to pending legislation expected to come out of a current Congressional conference committee. The committee is attempting to reconcile provisions of bills previously passed in the House and Senate. Of primary interest is the proposed elimination of regulations that prohibit vendors from providing advice to retirement plan clients or the participants of such plans.
Recent comments by committee members suggest that years of lobbying and false starts may be near an end. Other industry observers are less sanguine on the probability of meaningful change to retirement plan advice regs, but one thing is known for sure – that the McHenry survey sees problems either way the deal goes down. It appears that final regs will not address one of the more vexing issues of the retirement plan marketplace – advice to corporate retirement plan sponsors at the plan level.
Over the last several months, McHenry staff has conducted a multi-part survey of individuals at financial institutions, employers and advisory firms. Results indicate that the marketplace is not entirely comfortable with the possibility of retirement advice provided by service vendors – mutual funds, brokerage firms, insurance companies and other institutions.
Specifically, the survey found that:
- Over 55% of respondents thought that elimination of the prohibited transaction status on vendor advice was not appropriate.
- Over 50% thought it unlikely that vendors would fully and consistently comply with required disclosures regarding conflicts and compensation under the House bill.
- Over 67% thought it unlikely that employers would be able to make appropriate decisions regarding advice providers under terms of the House bill.
- Over 50% do not believe that that there is a shortage of capable, independent advisors available to provide advice to retirement plans and participants.
- Most respondents – some 67% - believe that independent advisors or consultants are the best source of advice for retirement plans and participants.
- Over 55% say that retirement plans and their participants would be better served if the provisions of the Senate bill are passed into law.
The McHenry Client Alert on Retirement Advice can be found at http://www.mchenrygroup.com/06advalert.pdf. The full report is available to McHenry clients without cost. Once the regulations are finalized, McHenry will host a webcast to review the details of the new law, together with its impact upon plan sponsors, retirement advisors and service providers.
About The McHenry Group
The McHenry Group, LLC provides business risk management and compliance solutions to meet the needs of regulated institutions, financial professionals and fiduciary investors. We have a simple mission – to help clients manage risk and return – helping to grow the value of their business. McHenry’s clients include banks, mutual funds, insurance companies, broker dealers and retirement service providers. PlanTools, LLC is a wholly owned subsidiary that provides technology-based investment reporting or advisory services. For more information, visit http://www.mchenrygroup.com.
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