Welcome to the new FiduciaryEra with its Fiduciary Imperative. (Photo: Shutterstock)

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We're settling in now. We're living in a new Fiduciary Era now.We have been for a number of years.

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Some have been quicker to realize it than others. Of course, theuncertain standing of the DOL's now-vacated fiduciary rule led to much of the tentativenesswe've seen.

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As with all transitions, this one was subtle. It has beenbuilding for a number of years. Ten years ago, when I first startedwriting on this topic, it was an underappreciated subject.

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This could be easily understood when many plan sponsorswere more concerned with maintaining the viability of their corebusiness, not in the arcane esoterica of their retirement plan.

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Gradually, though, in thanks in large measure to Phyllis Borzi'stenacity and John Oliver's Nielson ratings, the sense of“fiduciary” evolved from a dreary wonkish subject to a term morebroadly understood.

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Still, for all the growing awareness, it had been hamstrung byuncertainty. Would the DOL ever finalize a rule? Would that rulesurvive? What would happen once the rule became vacated?

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We're all past that now. And, as I've said, things have settleddown. We know where we stand, who's on what side, and where themarketplace sees the issue. Welcome to the new Fiduciary Era.

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As with all new eras, this one, too, has itsimperatives. I call it the New Fiduciary Imperative.

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It's a relatively simple set of straight-forward guidelines thatall 401(k) plan sponsors must commit to if they want to bettercontrol their fiduciary liability (see “A Fiduciary Focus: 5 Steps 401k Plan SponsorsShould Resolve to Take in 2019,” FiduciaryNews.com, January 2,2019).

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While the concept of a new Fiduciary Imperative may berelatively novel, the underlying tasks associated with it aren'tnecessarily new.

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The good news is leading-edge plan sponsors have beenexperimented them – honing them, if you will – for some time now.Many of these “steps” have been embraced by service providers, whonow include them in their quiver of offerings.

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It remains up to the 401(k) plan sponsor to recognize the needto move on from the old fiduciary paradigm to the new FiduciaryEra. If we ever get to a true universal 401(k) MEP, we'll see this movement accelerate, as itwill necessarily include broader outsourcing measures.

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Why the 401(k) MEP and not the growing number of state-sponsoredprivate company retirement plans?

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For one thing, the 401(k) MEP is a long-established vehicle.Most of its kinks have been ironed out and those that aren't arevery clear. The state-sponsored initiatives lack the operationaland compliance track record that would make them a viableoutsourcing alternative. Perhaps in a few decades, but nottoday.

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This outsourcing will place more responsibility in the hands ofretirement industry professionals. We will continue to see theimportance of the retirement benefit housed in the employer, but itwill increasingly be limited to the matching contribution, not theparticulars of the plan itself.

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There's little upside in a plan sponsor managing the particularsof the plan (which is why a universal 401(k) MEP is important), butthe offer of the size, frequency, and availability of a companymatch will always exist as a unique differentiator from one companyto another.

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What else does this new Fiduciary Era entail? For one thing, andthis shouldn't surprise anyone, conflict-of-interest fees will beeliminated.

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Actually, let me rephrase that. Current conflict-of-interest feestructures (i.e., 12b-1 fees, revenue sharing, and commissions)will diminish to the point where they will no longer exist.

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But the financial industry isn't dumb. They will create new feestructures that, while at first won't appear to beconflict-of-interest fee structures, will nonetheless retain thatsame reality.

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It'll take us some time to discover what they really are, sodon't be afraid if you're fooled at first. We will all be fooled atfirst.

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So, say hello to the new Fiduciary Era. Get used to it. It willbe with us for a while.

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READ MORE:

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The 'fiduciary rule' versus the 'rule of fiduciary'— Carosa'

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With fiduciary rule's demise, plan sponsor focusshifts

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Christopher Carosa

Chris Carosa has been writing a weekly article and monthly column for BenefitsPRO online and BenefitsPRO Magazine since 2011 and is a nationally recognized award-winning writer, researcher and speaker. He’s written seven books, including From Cradle to Retire: The Child IRA; Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort; A Pizza The Action: Everything I Ever Learned About Business I Learned By Working in a Pizza Stand at the Erie County Fair; and the widely acclaimed 401(k) Fiduciary Solutions. Carosa is also Chief Contributing Editor of the authoritative trade journal FiduciaryNews.com and publisher of the Mendon-Honeoye Falls-Lima Sentinel, a weekly community newspaper he founded in 1989. Currently serving as President of the National Society of Newspaper Columnists and with more than 1,000 articles published in various publications, he appears regularly in the national media. A “parallel” entrepreneur, he actively runs a handful of businesses, including a small boutique investment adviser, providing hands-on experience for his writing. A trained astrophysicist, he also holds an MBA and has been designated a Certified Trust and Financial Advisor. Share your thoughts and story ideas with him through Facebook (https://www.facebook.com/christophercarosa/)and Twitter (https://twitter.com/ChrisCarosa).