The US Department of labor (DOL) has for the past couple years been considering changes in law making it mandatory to disclose financial fees, expenses and how the end benefit is calculated along with possible risk when providing retirement planning. Risk can be exposure to loss as well as exposure to living too long. How are these calculations made and what are the factors used in making them?
How can they not disclose?
Does common sense and fair play dictate disclosure? Or is it the fact that the fees being charges are usurious? Are assumptions made by the actuaries based on reality? How are they calculating the future needs of the retiree? Fees and expenses should be disclosed and completely transparent along with the methods used in making long term calculations. Not only is it the right thing to do but it makes the playing field level.
The actual pro and con fight is between the insurance industry and the securities industry. The insurance side wants retirees to know the benefits of providing income over long term periods of time. The securities side feels that approach it too narrow and provides a disadvantage to them.
It is all in perception, fees, expenses, exposure to risk and exposure to longevity should all be disclosed.
What’s at risk is billions of dollars, dollars needed to fund retirements for the Baby Boomer generation. Disclosure can only help and why would you not want to know all the facts if you were considering a retirement choice? What is there to hide? Oh yes I forgot, the compensation earned over the time period along with the numbers used which are currently behind the curtain.
It looks like the DOL is leaning towards the safety and guaranteed side in which a ruling for more disclosure could hurt the security guys. The securities industry calls the DOL too “rigid” which may be true.
Still consider this simple fact: disclosure cannot be bad as long as it is equal. Both the securities side and the insurance side should welcome transparency in how they plan the accounts, fees and expenses and exposure to risk.