By Cyril Tuohy
A new, small-plan 401(k) retirement product that incorporates fiduciary services will make it easier for advisors to sell 401(k)s to small business owners who often don’t offer the plans because they are too expensive and complicated, according to Nationwide Financial.
The plan, branded as Nationwide Retirement Innovator Advantage, offers built-in Employee Retirement Income Security Act (ERISA) fiduciary services from Morningstar Associates.
Innovator Advantage is aimed at offering advisers ease and simplicity, Nationwide also said.
“In our role as a strategic partner, we spend a lot of time listening to firms and their advisors, and many articulated a need for a simpler product with a streamlined process,” said Joe Frustaglio, vice president of private-sector retirement plans sales for Nationwide.
Fulfilling ERISA requirements with regard to fiduciary duties is often the most complex and expensive part of a 401(k) plan, and the fiduciary liability is too great a risk for a small business to bear should something go wrong.
In addition to the fiduciary services, Innovator Advantage offers more than 400 mutual funds, fixed-income options and government-guaranteed deposit accounts. Advisors also can offer sponsors customized approaches and benefit from plan support ranging from plan reporting to participant education, the company said.
Retirement Innovator Advantage complements Nationwide’s existing Retirement Flexible Advantage program which offers advisors flexibility and control, Nationwide also said.
With so many Americans working for small businesses, beefing up the employer-based retirement system can only help workers, many of whom are not financially prepared for retirement, according to surveys and many financial professionals.
“As a U.S. company, we clearly see and understand the looming retirement crisis Americans face,” Frustaglio said in a news release.
<p> Nationwide is the latest insurance company to offer Morningstar as the fiduciary for retirement plans. Great-West Retirement Services, a subsidiary of Great West Financial, offers a similar arrangement for its retirement plan sponsor clients.
If found guilty of breaching its fiduciary duties to the plan, Morningstar is on the hook for legal fees of the plan’s fiduciaries and for damages awarded to the plaintiff, according to Great West.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].
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