When I was in law school at American University and we moved into a new building (20 years later, they are now in another new building) a few blocks away from the main campus. The computer sync site at the new building had a number of Apple Macs and the former law school Dean didn’t understand why we would spend money on what he called the Betamax of computers and in 1995, Apple was on its last legs. Thanks to the return of Steve Jobs, Apple made one of the greatest comebacks in business history. However, it took some time for Apple to get its mojo back and it probably could be traced to the Introduction of the ITunes Store in 2000 and the IPod in 2001. Apple didn’t become one of the most successful companies again, overnight.
When the proliferation of financial advisors that started offering §3(38), I heard a lot of their competitors claim that plan sponsors weren’t really asking for it. I heard the same thing when plan providers (including yours truly) started offering §3(16) administration services. Over time, I have heard more and more plan sponsors asking for these services. I know firsthand because I have had a lot more opportunities and meetings with plan sponsors wanting to delegate their duty as plan administrator.
Cable TV, VCRs, Wi-Fi Internet, smart phones, and tablets. These are just some products out there that took time to get popular. Any new product or service needs time to develop and get enough traction that consumers become aware of it. It takes time and interest, but products and services that offer a value proposition will gain traction if people know about it.
So the lesson here is that plan sponsors will further educate themselves on these ERISA fiduciary solutions and they will start demanding them. It just takes time and information.