Broker Check

The Conundrum About Data

| April 08, 2021
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Raise your hand if you hate the phrase "a slippery slope" when making an argument against doing something? Ok, maybe a blog isn't the best medium to ask for a show of hands but I am going to go out on a limb and assume I can't be alone on this one. 

Having said that...we may have a slippery slope situation on our hands right now as financial advisors, more specifically financial advisors to 401(k)'s and other retirement plans. 

As an advisor to a 401(k) plan I am given access to lots of information about the participants in the plan that I am trying to help. The access to this information can be a great thing, proving to be a valuable tool for identifying and addressing potential issues a participant might not even be aware of. Case in point: during a recent plan review meeting with a 401(k) committee we reviewed the asset allocation of the assets by investment option but also by age range. Most of the information looked like we would and expect for most of the funds, higher equity exposure for the younger age brackets, more fixed income in the older brackets, correct distribution of the target date funds, etc. but we did notice a higher than expected allocation for the employees in their 30's to the plan's most conservative option, a stable value fund. The committee members showed a bit of concern about that so I made a point to dig into the data a little bit deeper and get back to them with my findings. What I discovered was that the vast majority of those dollars in the stable value fund were from just one participant. When I reported that back to the committee they gave me to ok to reach out to the participant and ask more about the how and why of his extremely conservative approach. Probably won't be a shocking end to this story for anyone who regularly interacts with 401(k) participants but it turned out that the choice to be so conservative wasn't an intentional one, they just didn't understand all of the options when they enrolled so the term stable value seemed like a good idea to them. Are a short conversation the participant in question decided that a target date fund was a better sounding solution for them.

This example is not earth shattering, fairly standard example of using plan data available to help participants. So where's the slippery slope? Your Honor, at this time the prosecution would offer Exhibit A.

In a recent excessive feel lawsuit brought against Shell Oil it was argued that the company had breached its fiduciary duties by allowing the plan's recordkeeper, Fidelity Investments, sharing participant data with its affiliates. Those affiliates then took the data they were able to mine from the plan and used it as an opportunity to sell additional products like IRAs, credit cards, life insurance and many others to the participants in the plan. Ultimately the judge in this cased decided that participant data is not considered to be a plan asset and therefore it being shared with the affiliates did not represent a prohibited transaction. In this instance the lawsuit was thrown out on what amounts to a technicality of what is considered a plan asset under ERISA but doesn't answer the question of whether it is something a recordkeeper SHOULD do?

A lot of focus, and with a good reason, is placed on the security of participant data against outside influences attempting to hack their way in. But what if:

      


The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Matt Callan and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance does not guarantee future results. This is not a recommendation to purchase or sell the stocks of the companies mentioned.


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