Frontline’s View of Retirement Industry as Commodity is Dead Wrong

Planning isn’t just about Fees—it’s about Service

ARLINGTON, VA, (April 24, 2013) – The following is a statement from Brian H. Graff, Executive Director & CEO of The American Society of Pension Professionals & Actuaries (ASPPA) in response to the PBS Frontline program “The Retirement Gamble.”

“PBS Frontline’s ‘The Retirement Gamble’ program claimed to be an ‘eye opening investigation of a financial services industry that may be draining your retirement savings with every passing year.’ Unfortunately, the program relied too heavily on a study we debunked when it first came out about a year ago that overstated typical 401(k) plan mutual fund fees. What is more troubling, however, is Frontline’s take that fees are by far the most important factor to be considered when choosing an investment, and the retirement industry offers participants little value. In other words, that the industry is nothing more than a commodity.

However, Frontline conveniently ignores all that it takes to make working Americans into retirement savers. We all know it’s not that simple.

First, it starts with a plan, because without a retirement plan at work, people do not save. Less than 5% of individuals making between $30,000 and $50,000 save on their own, compared with more than 70% of those same earners with access to a workplace retirement plan.

These retirement plans require an engaged team—employers, advisors, and employees making informed decisions on plan design, benefits and investment options. (See ‘Road to Retirement Infographic’)

There is a significant value associated with these services, and an attendant cost as well. It is not—and it should never only be about fees. If you were having trouble with the law, would you simply look for the cheapest lawyer? Certainly not. For something as important as retirement savings, you should not base your decision solely on cost either.

Nothing in the history of this country has promoted more savings by average Americans than the 401(k) plan, with total assets in excess of $4 trillion (plus over $5 trillion in IRAs, much of which is from 401(k) rollovers). Three-quarters of American families became investors first through their workplace retirement plan. It is hard to imagine where we would be without our nation’s private retirement system.

The system is not perfect. We need to expand coverage to those without a plan at work. We need to make it seamless for workers to save through greater utilization of auto-enrollment. And we need to make sure we focus on outcomes so the system produces the retirement results reasonably expected by both plan sponsors and participants.

If the retirement plan industry continues to innovate and deliver on these promises, the value proposition that is provided will be self-evident. Retirement plan services are not a commodity, and it’s ultimately up to the industry to show this.”

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About ASPPA: The American Society of Pension Professionals & Actuaries (ASPPA) is a national organization of more than 11,000 retirement plan and benefits professionals that serves as the educator, voice, and advocate for the employer based retirement system. ASPPA members are administrators, actuaries, advisors, attorneys, accountants, and other financial services professionals who provide consulting and administrative services for qualified retirement plans.

Tags: 401(k), Brian Graff, Expert, featured, Fee Disclosure, Fiduciary, Investment Professionals, Regulation, Retirement Security

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