As the days get closer and closer to that elusive first deadline for plan sponsor fee disclosures - and the sure-to-be-exciting moment of truth for participant disclosures - it might be a good time to take a broader look at both the good and bad of similar experiences in other industries that have gone through a government-regulated "parting of the curtains."
Those of us attending SPARK's national conference in D.C. earlier this week got a hopeful (but equally unnerving) dose of compare and contrast of the real-world impact of federally mandated clarity in industries including the auto business, the pharmaceutical business and even the much-beloved tobacco industry, courtesy of Cynthia Hayes, president of Oculus Partners LLC.
The good news? For even the most controversial of businesses, being forced to provide a wider sense of clarity to consumers has provided plenty of new business opportunities and has given many the chance to modify their products and strategies for more successful market penetration.
As Hayes gently requested, any comparisons to Big Tobacco - who saw, for the better health of American consumers, their domestic business decimated by government regulation - may not be the most positive role model, but even that industry learned to adapt. Forty-three percent of Americans smoked in 1965, before the first advertising bans and health warnings appeared, and five decades later, after C. Everett Koop, lawsuits and serious litigation, only 19 percent of the population still smokes. Tobacco, as Hayes mentioned, moved its focus overseas. The winners? The American public.
A nicer example might be what happened to the food industry, as year after year has brought better food safety standards, ingredient and allergic content disclosures and a multiplicity of nutritional labeling. We've seen the entire organic food industry blossom, and even Wal-Mart and McDonalds have healthy choices.
The result? Harder to quantify: obesity rates, as we continue to hear, are soaring, not just in the U.S. but worldwide. But the transparency involved, particularly in the whole health food movement, has led to a $27 billion a year industry.
The pharmaceutical business? Again, Hayes suggests that a gradual growth in FDA approvals and pushes for patient rights have benefited consumers, but that industry also shows that lobbying works (an apt notion to mention in D.C.) and the result has been that endless barrage of consumer advertising for medications. So much so that the FDA has now counterattacked with a "Bad Ad" patient safety campaign. But could a long-thought-about campaign of direct-to-consumer ads be beneficial to the retirement business, as well?
The closest example to what might happen in the retirement industry, she suggested, could be the changes in the automotive industry. There, the change has been driven not only by a tremendously challenging economic climate, but a series of technological advances: social media and smart phones mean that consumers no longer go to car dealerships to shop around, but do their research up front and come into a buying environment more informed and sales-averse than ever.
Auto dealers have had to deploy a whole new value model and change the way they do business in order to survive.
What does this mean for the retirement business? Tim Slavin, senior vice president of defined contribution for Broadridge Financial Solutions, said he believes that those enlightened consumers will make for better customers and want to take a more involved role in their own retirement planning.
"Distribution will change, but most importantly, the urban myth that stuff is free in your 401(k) will be dead," he said. "But it's a big opportunity, especially if consumers are paying attention and actually opening their statements."
Peter Newkirk, president of Newkirk, a DST Company, said he anticipates what he calls the "aha moment" when participants get their first statement, which he feels might create a real backlash against sponsors and providers.
Newkirk also notices that for the first time since 401(k)s were created, the retirement business is making headlines in even mainstream press and TV, again another opportunity for education and growth in participation.