The Retirement Security and Savings Act "is fatally flawed" because it would limit competition in the retirement marketplace and allow recordkeepers and their affiliated partners to steer plan participants into higher-cost proprietary investments, Michael Kitces, co-founder of XY Planning Network, told members of the Senate Finance Committee in a recent letter.
Such an arrangement also would require a safe harbor under the Employee Retirement Income Security Act, Kitces said.
Under Section 112 of the bill — S. 1770, which was reintroduced on May 24 by Sens. Ben Cardin, D-Md., and Rob Portman, R-Ohio, and includes a few new provisions — "the vast majority of plan sponsors offering [deductibility of retirement advice fees] would work through large recordkeepers" to offer it to their employees, Kitces told the lawmakers.
"The ideal goal of this provision is laudable by encouraging employers sponsoring a self-directed retirement plan to help employees select the best available investment options," Kitces said. "However, the practical result would be conflicted investment advice and a plum for big recordkeepers in the retirement industry."
Kitces maintained that the provision also discriminates against the independent advice channel and would only be available to those who work for companies offering the option.
