403(b) Summit: How Vendors are Adapting to New 403(b) Regs

Michael Pratico, VP, Financial Advisor, CapTrust Financial Advisors, and member of a panel of industry leaders at PLANSPONSOR’s 403(b) Summit in Amelia Island, Florida, predicts the industry will see consolidation of vendors and some exiting the marketplace. He said those with the scale to offer recordkeeping cost effectively will dominate the market, adding that all these changes will be a good thing providing better products at lower cost.

Richard Turner, VP and Deputy General Counsel, AIG Retirement, pointed out that K-12 public schools and public higher education institutions will have unique needs providers will need to address. As examples, Turner noted that programs sponsored by these employers are governed by state law and union collective bargaining agreements that providers will need to be knowledgeable about. In addition, these entities often have multiple 403(b) plans with multiple vendors which makes a single vendor program impossible.

Turner says the best providers are reaching out to this portion of the market by not trying to make them fit into a particular offering. The best providers also assist with establishing a written plan document, have solutions in place for the complex task of ongoing monitoring of vendors and transactions, and have a method in place for information sharing among all parties, according to Turner.

When searching for plan providers, Pratico suggests sponsors and advisers ask for pricing of services apart from fund pricing and compare prices among providers. They should also look for providers with technical expertise, he said. Sponsors should find out what is included in all service offerings.

John Pickett, SVP Institutional Consulting Group, RBC Dain Rauscher, suggests sponsors list the services they require for their programs and ask providers to price each service. He stressed that sponsors need complete fee transparency from vendors.

Finally, Pickett said, those searching should look for which providers are acquiring other firms because that is a sign they will be around for years to come.