Mark Quinn, chief risk officer with First Allied Securities, said his company started putting together their client disclosures six to nine months ago, back when the effective date for the fee disclosure rule was July 1, 2011. The Department of Labor's extension to January 1, 2012 has really helped his company — and others – prepare all the necessary information and deliver it to their clients before the deadline. And that process takes a lot of work. 

"You have to figure out, for each individual client, not just the fees that you're charging, but what are the services you're providing," he said. "You may be getting paid in several different ways; you may be getting paid commissions up front front, or ongoing commissions or flat fees. There are all of these different revenue streams to consider, and they're different with respect to every plan. 

"And of course, and with every plan there are different services provided. Some plans you're giving just educational services, some you're giving advice to only the sponsors, some you're giving advice to the participants and the sponsors, sometimes you're holding workshops, sometimes it's one-on-one financial advice…so if you have several thousand plans, getting all this information together is a lot of work."

Quinn added that for smaller firms, with only 50 clients, or for companies that provide the same services to every client across the board, the fee disclosure process isn't as daunting. But for companies like his where there are a large number of clients, each receiving individualized services, it becomes a costly and cumbersome process.

AXA Equitable is another company that is in the process of putting together their fee disclosure rules and encouraging their plan sponsors to get together with their advisors (tax, legal, and financial) to be sure they fully understand the rules. But Chris Giorgi, VP of Advanced Markets for AXA Equitable's Employer-Sponsored Division, said his company is taking it one step further.

"As you can imagine, a lot of these plan sponsors don't understand the rules," he said. "So what we're in the process of doing to help them is a lot of education: newsletters, one-on-one plan sponsor discussions, webinars, a variety of educational outreach to help them understand what the new rules are."

Redefining the word

Another contentious issue up for debate is the definition of fiduciary. If adopted as written, it could have a huge affect on the types of plans sold and the advice dispensed to participants — and even how it's dispensed.

Though the regulation hasn't officially been adopted, the Department of Labor has issued a tentative effective date of January 1, 2012. And Phyllis Borzi, head of the Department of Labor's Employee Benefits Security Administration (EBSA), has been outspoken in her determination to update the current definition, which she says is outdated.

So how are companies, brokerages, and financial advisors preparing in the event of adoption? That depends.

Merrill Lynch, for example, has recently decided to allow its broker-dealers  to work as fiduciaries, a move that was previously not allowed. Indeed, according to Howard Stolzer, chief investment officer for Benefit Sources & Solutions, many broker-dealers have let him know recently that they're going to make the switch to investment advisors so they don't have to worry about this fiduciary definition issue affecting them.

"Investment advisors, we're thrilled about this. We think it helps the investment advisor community really show the value that they offer to their client and really bring things out into the open," he said. "But I don't think it's so good for the broker-dealer because there's a lot that goes on with the broker-dealer plans that are really undisclosed."

Another way Stolzer said many companies are coping with the definition issue is to create units or partnerships within organizations to act as the fiduciary. According to Giorgi, that's the path that AXA Equitable has taken. The company has teamed up with Wilshire Associates Incorporated to offer fiduciary advice. Though this partnership was not specifically implemented as a result of the regulation, Giorgi said that it helps takes the issue off the table for the sponsor.

"We put it in place earlier this year in response to industry demand for more fiduciary advice, but it does provide the sponsor a solution to that fiduciary definition change," he said. 

Is it worth it?

Quinn notes that, although preparing the disclosure statements has created a lot of work for his company, it's all in the name of greater transparency and making it easier for plan sponsors and participants — who aren't in the financial industry – to get a better understanding of what they're involved with. And for the most part, that's a great thing.

"I think most plan sponsors and trustees, since this isn't their full-time job, they don't think about," he said. "If you have a guy who's running a sheet metal business, he assumes retirement investments will work just like health insurance. Let's get a plan, let everyone sign up for it, and then I can forget about it. But that's not the way it works."

And while more transparency and universal standards could be great, they could also have huge ramifications. Quinn related a hypothetical scenario where a fiduciary is asked to choose between two products that are exactly equal except for price. He would have to recommend the less expensive one, but that leads to a slippery slope where fiduciary obligation is equated with cheapest, and that one criterion is used to determine which products are best.

"That blows up our whole business model," he said. "We certainly don't believe cheapest equals best and we certainly believe that our service offers value and that what our clients receive at the price we charge offers value. But trying to impose one universal standard for everyone's business model is difficult."