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401(k) Real Talk Transcript for October 18, 2023

Transcript of Episode 81 of 401(k) Real Talk.

Greetings and welcome to this week’s edition of 401k Real Talk. This is Fred Barstein contributing editor at’s RPA Edge and CEO at TRAU, TPSU & 401kTV - I review all of last week’s stories and select the 5 most important and interesting ones providing open honest and candid discussion you will not get anyway else. So let’s get real! 


In a surprising turnaround, having enough money to pay for an emergency, not saving for retirement, was the #1 cause of stress for workers in a new EBRI/Greenwald study. Paying monthly expenses was #2.

The convergence of wealth, retirement and benefits is full on with supplemental, nonrelated features like emergency savings and student loan debt being added to the workplace platform. In reality, they are all related, as people balance their expenses, savings and allocation of benefits requiring smarter tech and more savvy advisors for both plan sponsors to design the right packages and employees to allocate optimally.

Meanwhile the industry is asking for more clarification about PLESAs under S 2.0 including how to withdraw without penalty and what constitutes an emergency. A Fidelity report indicates that DC participants rank emergency savings just behind saving for retirement.


As the industry awaits the DOL’s new fiduciary rule currently at the OMB, acting Sec’t Su’s comments to a Senate committee reviewing her confirmation are revealing.

According to Su, the DOL is committed to proposing a new fiduciary rule with the focus on eliminating conflicts of interest especially related to. She is concerned with advisors being regulated by different agencies creating unlevel playing fields though she did indicate that the DOL is coordinating with the SEC and IRS.

So while it is a clear conflict for a plan advisor to induce an active participant to move assets from the plan to an IRA which can result in 10 times greater fees, when is it the best interest for a terminated participant to roll out of the plan? There are tools today that allow advisors to manage client’s assets within a plan while the DC industry is scrambling to offer in-plan retirement services.


According to a Cerulli report, sponsors of managed accounts are concerned about the returns of advisor managed accounts with 82% consistently underperforming those managed by a home office. The report included 30 sponsors accounting for 90% of the managed account assets.

70% of affluent investors believe that advisors are not best positioned to manage the discretionary portfolios while 79% of sponsors say that advisors stray from their investment policy.

Though gaining traction, only 17% of RPAs use managed accounts as the default option according to Sway Research with limited usage or engagement outside of the QDIA. They also pose a potential conflict of interest if a fiduciary advisor is paid extra by the managed account they use or recommend.


Morningstar and others are pushing back on the SEC’s AI and predictive index analytics rules claiming it is too complicated and would unnecessarily increase expenses recommending instead that they should be part of Reg BI. Previously, FSI, the US Chamber and NAIFA had expressed concerns.

The issue is whether AI and predictive analytics could be skewed to benefit the advisor and their firm creating conflicts -proponents of the new rule claim that advisors could comply with Reg BI if they were part of the rule through disclosure with investors unaware of programmed conflicts of interest.

Much more to come about AI for the financial services industry with some sort of oversight required by regulators to protect investors.


Using acronyms and code sections are symptoms of the problem known as the curse of knowledge which means we do not know what it’s like not to know. Using industry language without defining it is demeaning and will turn away clients and prospects, not impress them.

In my column this week, I discuss how dangerous and debilitating using code sections and acronyms can be alienating plan sponsors and participants alike.

Plan sponsors lack of knowledge and experience is an advantage but only to advisors that do not fall into the trap of the curse of knowledge using arcane language.


So those were the most important stories from the past week. I listed a few other stories I thought were worth reading.

Please let me know if I missed anything or if you have any comments. Otherwise, I look forward to speaking with you next week on 401kReal Talk.


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