In early February the DOL announced the guidelines for its newfee disclosure rule. Sadly, the DOL (again) pushed back theimplementation date three months to July 1. It's sad for tworeasons. First, it only delays the inevitable and perhaps hurtsinvestors. Second, it now precludes the delicious irony of exposingonce hidden fees on April Fools' Day and, given theconflict-of-interest ramifications of revenue sharing, theopportunity to mention “a fool and his money are soon parted.”

Fiduciary proponents no doubt delighted in the forthrightaggressiveness of the DOL's promotion of these new guidelines. Itssimple rule to 401(k) plan sponsors should they find a serviceprovider fails to properly comply with the new rule: Fire them. Itwasn't a suggestion; it was an order. This may place some vendorsbetween a rock and a hard place. By showing 401(k) plan sponsorsthey were saving pennies while losing dollars, it may discouragethose 401(k) plan sponsors from selling their soul for one-stopshopping.

Which vendors lay destined to soon fall within the crosshairs ofthe ire of 401(k) plan sponsors? A regulator once told me, when hefirst arrived at his job, he laughed at industry pros who told himmany 401(k) investors thought they could get something for nothing.He now realizes too many believe they are getting their 401(k) forfree. The new fee disclosure rule will expose this fallacy.Quickly. And disturbingly so for naïve plan sponsors. No longerwill vendors be able to hide fees with 12b-1 payments or revenuesharing. Those who touted “low” fees as a result of these hiddenfees must now fess up.

While not limited to this group, it's likely bundled serviceproviders might find, as Desi would say, they have some 'splainin'to do. Since fees now have to be identified by service, bundled feeproviders can't rely on one side of the business subsidizing anyother side. For example, if a vendor is going to offer “free”recordkeeping, fee disclosure will likely expose higher thanaverage costs associated with investments.

There'ss a growing consensus the costs of bundling, both interms of direct and indirect dollars paid and the potentialliability costs associated with due diligence, should move 401(k)plan sponsors away from such solutions. And by “bundled,” we'rereferring to one—usually “big name”— company as opposed to analliance of independent vendors. The former often features thosehidden fees and conflicts-of-interest we keep talking about, whilethe latter often displays both fee transparency and a conflict-freeopen platform.

This last point may signal the future direction of the serviceprovider industry (perhaps in the guise of multiple employerplans?). In the new world of the fee disclosure rule, 401(k) plansponsors may find it's better to have paid a little bit more for“best of breed” than suffer the potential fiduciary liability ofone-stop shopping. After all, “he is no fool who gives what hecannot keep to gain what he cannot lose.”