Like it or not, the new retirement plan fee disclosureregulations from the Department of Labor (DOL) are here to stay.The good news, however (yes, there is a positive side to allthis), is that you can use these regulations to demonstrateyour value, service and expertise.

Preparation is the key, and the time to prepare is rightnow. Although the DOL extended the effective date for thenew plan sponsor fee disclosure rules to Jan. 1, 2012, you stillneed to get a jump on the rules—and how you’ll handle them—to makethe most of this opportunity. These five key steps will help.

Step #1. Educate yourself

Start by making sure you understand the rules and theirpotential impact on you and your clients. The basics below willhelp you get started. For the all-important details, refer to twowhite papers by noted ERISA attorney Jamey Delaplane, partner,Davis & Harman LLP[1]. They are, New FeeDisclosure Rule for Retirement Plan Service Providers: WhatFinancial Professionals Need to Know and New ParticipantFee Disclosure Rules: What Plan Sponsors Need to Know. Bothwhite papers are available at www.principal.com/feedisclosure.

Plan sponsor disclosure 101

As of Jan. 1, 2012, most financial professionals who work withretirement plans—including brokers, registered investment advisers(RIA), insurance agents, financial planners and other plan serviceproviders—will be formally required to disclose to their plansponsor clients the fees they receive and the services theyprovide. Financial professionals will also be required to state ifthey are a fiduciary and if so, for which services.

The new requirement applies to both new and existingservices arrangements with most retirement plan subject to ERISA.The regulation requires financial professionals to disclose twolevels of fees:

• Direct compensation. This is compensationreceived directly from the covered plan, not from the plan sponsor.It may be a good practice to disclose payments from plan sponsorsanyway in the spirit of transparency.
• Indirect compensation. This is compensationreceived from any source other than the covered plan, theplan sponsor, the service provider—meaning you or your firm—, anaffiliate or a subcontractor. Indirect compensation would includecompensation received from investment options, such as 12b-1 feesand commissions, and compensation received from other serviceproviders, including finder’s fees, gifts and entertainmentexpenses.

While there is no specific standard for the level of detail fordescribing services, it would be wise to provide a reasonablydetailed description of the services you offer—and the services youwill not provide.

Step #2: Find out where you—and yourclients—stand

Next, review the covered plans for which you provide services.Determine for which plans you’re considered a covered serviceprovider. Also, identify the category (or categories) of coveredservices you provide. Carefully review any services you may provideas an ERISA fiduciary or an RIA.

Then consider those clients’ current level of understanding whenit comes to your fees. Ask yourself questions like, “Do my clientsunderstand how I’m paid? Do they understand how much I’mpaid? How do I make sure my clients appreciate the value I bringfor the fees being paid? And do they understand whether or not I’ma fiduciary?”

Step #3: Evaluate how your disclosures may need tochange

Once you’ve determined which clients will be impacted, it’s timeto figure out how your disclosures should change. Keep yourbusiness model in mind during this step, as the changes to yourdisclosures could affect the way you do business.

Step #4: Ask how your firm will handlecompliance

If you work with a broker-dealer or a RIA firm, find out how thefirm plans on handling compliance. Consider contacting legalcounsel for help if you don’t have access to compliancesupport.

Step #5: Decide how you’ll describe your services—andput it in writing

Finally, determine how you’ll describe your services, and putyour service plan in writing. A formal “commitment of services”document is a great way to do this.

An obligation AND an opportunity

Ultimately, thorough disclosure of your services and fees canhelp you deepen your relationships with existing clients. It canalso be helpful as a prospecting tool for engaging new clients, whowill clearly understand your fees and service offerings. So getstarted now—and turn this obligation into an opportunity!

[1] Davis & Harman LLP and Jamey Delaplaneare not an affiliate of any member of the Principal FinancialGroup.