Remember those investment consultants from the 1990s? They'd arrive all prim and proper into the 401(k) plan sponsors' conference room and slam a thick volume of solid paper on the table. They would then open their benchmark bible to the first chapter: numerology. In fact, every chapter was titled "Numerology" and, save for a few colorful pie charts, everything else was dry, black-and-white data. And the C-suite of sponsors smiled as if they understood.
They didn't. And that was maybe the ultimate objective of the consultant – make it so complicated they just couldn't fire you. Only you knew how to interpret the tea leaves of the 401(k) plan which the DOL held them – and, back then, for the most part, only them – accountable. They might not have known how to precisely measure their fiduciary liability, but these executives knew the word "liable" – and they didn't like it.
And while the consultants, and the financial products they were beholden to, bedazzled the plan sponsor with Modern Portfolio Theory mumbo-jumbo, the real liability lay hidden in an ocean of marketing literature and prospectuses that probably did actually disclose the existence of 12b-1 fees and revenue sharing kickbacks, but who reads all that stuff anyway.
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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).
