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Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested.
Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc. Two World Financial Center, 225 Liberty Street, New York, NY 10281-1008 © 2012 OppenheimerFunds Distributor, Inc. All rights reserved.
Regulatory Serendipity: Fee Disclosure Generates Optimism and Opportunity
2
About the Survey
Goal of the survey: To gauge the impact of fee disclosure regulations on plan sponsors and participants
Fielded: September 2012
Respondent base: Decision makers from an independent panel of retirement plan sponsors
Methodology: Online, 44 question survey
Respondents: 200 randomly selected plan sponsors:
Plan Type Total Employees Total Respondents
Micro plans <100 employees 42 respondents
Small plans 100-499 employees 42 respondents
Mid-size plans 500-999 employees 39 respondents
Large plans 1,000-4,999 employees 42 respondents
Mega plans 5,000+ employees 35 respondents
3
Agenda Executive summary
Importance of fees in hiring process
Pop quiz: How well do plan sponsors understand requirements?
Impact of fee disclosure
Opportunities
4
Executive Summary
References to disclosures generally cover both 408(b)(2) and participant-level disclosure, unless context clearly relates to only one disclosure rule.
In September 2012, shortly after the first service provider and participant disclosures were delivered to
plan sponsors and participants, OppenheimerFunds conducted a nationwide survey of 200 retirement plan
sponsors to gauge the impact of the fee disclosure regulations. The survey results show that plan
sponsors are largely positive about the information being disclosed. They perceive benefits to themselves
and their participants.
Substantially more plan sponsors believe that the benefits of fee disclosure already do or ultimately will
outweigh the drawbacks (66%) compared with those who believe the drawbacks will outweigh the benefits
(27%). More than one-third said that disclosure of fees is a positive change and nearly one-third said that
the disclosures make their lives easier. While plan sponsors see several benefits, key among them are:
Disclosures help them meet their fiduciary responsibilities
Improved provider transparency
Disclosures help them to better understand fees relative to services and make educated decisions about providers
5
Executive Summary
Most plan sponsors also see drawbacks. Sponsors cited time consumption, use of resources that could
be better used for other purposes and an increase in participants challenging plan decisions as top
drawbacks.
Sponsors also believe the disclosures hold several benefits for participants, including participants:
Feeling more educated about the plan
Having an increased trust of the plan sponsor
Better understanding the purpose of fees
Being more familiar with the plan
6
Executive Summary
Many sponsors realize that despite having a clear picture of fees, they still need to assess the value of
services—48% believe that providers with the lowest fees do not always provide the best value.
However, the converse is not well-accepted; only 4% of sponsors believe that higher fees can indicate
higher value.
Despite plan sponsors’ general level of optimism and empowerment, most admit that they are not
confident that they know what to do with the information received. Only 20% of respondents are very
confident. This represents a tremendous opportunity for advisors to provide guidance and support. And
sponsors actually understand less about the disclosure requirements than they think—assistance is
needed to help them understand and properly fulfill their obligations.
A strong majority of plan sponsors did not know how often plan providers are required to furnish information.
And just 9% of plan sponsors surveyed knew the three steps that must be taken if they do not receive adequate disclosures.
7
Executive Summary
The fee disclosure requirements also offer an opportunity to engage with participants. Plan sponsors are
particularly concerned that participants will be drawn to the least expensive investments—without regard
for asset allocation, services or investment style.
To help participants with concerns raised by fee disclosure, plan sponsors have already taken several
steps—or plan initiatives within the next year—including:
Reminding employees whom to contact with questions
Providing materials created by the provider or advisor
Offering a meeting to discuss plan fees
Adding resources to respond to employee inquiries
8
Agenda Executive Summary
Importance of fees in hiring process
Pop quiz—how well do sponsor understand requirements?
Impact of fee disclosure
Opportunities
9
Fees Have Major Impact on Provider Hiring
Source of chart data: OppenheimerFunds’ Post-Fee Disclosure Survey, September 2012
When asked to allocate 100 points to various plan provider selection criteria, sponsors allocated the most points to fees—an average of 22.2 points, almost as much as service quality and the provider’s capabilities combined. This emphasis on fees over value could lead to increased fee compression; providers must articulate their differentiation or risk being commoditized.
1.3
6.0
6.3
10.4
12.9
13.2
13.7
14.1
22.2
0 5 10 15 20 25
Other
Innovative Services
Quality of Technology
Compliance Capabilities
Investment Philosphy
Existing Relationship
Recordkeeping Capabilities
Timely and Accurate Service
Plan Provider Fees
Allocation of points out of 100
Prioritization of considerations when hiring plan provider
10
Advisors and Performance Drive Fund Lineups
Advisors play a key role in selection of investment options, and their recommendations are more highly considered than even historical performance. While fund fees are important, they are not the most critical selection driver.
2.0
5.0
6.6
8.0
8.5
8.5
11.1
13.8
17.5
19.0
0 5 10 15 20
Other
Services Offered by Company
Portfolio Managers
Risk Management Process
Provider Preferred List
Familiarity with Company
Investment Philosophy
Fund Fees
Historical Performance
Recommendation from Advisor
Allocation of points out of 100
Prioritization of considerations when selecting investment options for plan lineup
Source of chart data: OppenheimerFunds’ Post-Fee Disclosure Survey, September 2012
11
Advisor Fees, Philosophy and Services are Key Drivers Fees are the most important driver of advisor selection, although they are not identified as such a dominant criteria as they are for the plan’s recordkeeper. Many additional factors are considered almost equally important, such as investment philosophy and services. Advisors will need to demonstrate their value to substantiate their fees and, given the importance of services offered, a menu-driven approach to pricing might be optimal.
4.2
7.8
11.9
13.1
13.6
15.5
16.5
17.4
0 2 4 6 8 10 12 14 16 18 20
Other
Existing Client Base
Recommendations
Will Act as Fiduciary
Structure of Fees
Services Offered
Investment Philosophy
Level of Fees
Allocation of points out of 100
Prioritization of considerations when selecting a plan advisor
Source of chart data: OppenheimerFunds’ Post-Fee Disclosure Survey, September 2012
12
Plan Sponsors are Willing to Pay a Premium for Active Management and Recordkeeping
Source of chart data: OppenheimerFunds’ Post-Fee Disclosure Survey, September 2012
80% of sponsors are willing to pay a premium for certain services, with active investment management viewed as most spend-worthy. Superior recordkeeping services from providers are also seen as deserving of higher fees, as are fiduciary investment services from advisors. But for 20% of respondents, low fees are paramount.
20%
1%
28%
28%
36%
40%
42%
0% 10% 20% 30% 40% 50%
None
Other
In-person Presentations
Customized EmployeeEducation
Fiduciary Investment Services
Recordkeeping Capabilities
Active Management
Percent of Sponsors Selecting
Services for Which Sponsors are Willing to Pay a
Premium
Plans with more than 500 employees are more likely to pay a premium for active management, perhaps reflecting more expertise or resources focused on investment strategy.
26%
33%
46%
55% 51%
Micro Plan<100 Ees
Small Plan100-499 Ees
Mid-Size500-999 Ees
Large Plan1,000-4,999
Ees
Mega Plan:5,000+ Ees
Pe
rce
nt of S
ponsors
Larger Plans are More Willing to Pay Premium for Active
Investment Management.
Active Management
Recordkeeping Capabilities
Fiduciary Investment
Services
Customized Employee
Education
In-person Presentations
Other
None
13
Agenda Executive Summary
Importance of fees in hiring process
Pop quiz: How well do plan sponsors understand requirements?
Impact of fee disclosure
Opportunities
14
Plan Sponsors Need Better Understanding of Requirements
Source of chart data: OppenheimerFunds’ Post-Fee Disclosure Survey, September 2012
:
74% of sponsors believe they know all of the fee disclosure requirements, while 24% admit they don’t really know them and 3% don’t know them at all. But do those who think they know the requirements really understand them?
I Know Them Very Well 16%
I Know Them Somewhat Well
58%
I Don't Really Know Them
24%
I Don't Know Them at All 3%
How well do you know all of the requirements of fee disclosure regulations?
15
Pop Quiz: “Investment-Related Information Must be Furnished…”
Source of chart data: OppenheimerFunds’ Post-Fee Disclosure Survey, September 2012
8%
21%
50%
9% 7% 7%
I Don't Know Annually Quarterly Within 90 Daysof Any Change
Within 60 Daysof Any Change
Within 30 Daysof Any Change
Pe
rcen
t o
f S
po
nso
rs
Only 21% of sponsors knew that participant disclosure information was required to be furnished
annually—and only 7% knew that it needed to be updated within 60 days of any change.
16
Pop Quiz: “If My Provider Does Not Provide Adequate Disclosures, I Must…”
1DrinkerBiddle Client Bulletin, July 2012
Source of chart data: OppenheimerFunds’ Post-Fee Disclosure Survey, September 2012
15%
3%
30%
20%
64%
I Don't Know I'm Not Obligated toFollow-Up
Report Provider toDOL
Terminate theRelationship
Request Informationfrom Provider
Pe
rcen
t o
f S
po
nso
rs
A large number of respondents were aware of at least some of the steps necessary if they did not receive
adequate information from their service providers, although just 9% knew all three required measures if
the covered service provider does not provide timely and adequate disclosures. Plan sponsors who fail to
engage in a prudent evaluation process, or fail to identify and act upon missing or deficient disclosures,
will be subject to a fiduciary breach and possible prohibited transaction.1
Just 9% of Sponsors Selected All 3 Correct Answers
17
Agenda Executive Summary
Importance of fees in hiring process
Pop quiz: How well do plan sponsors understand requirements?
Impact of fee disclosure
Opportunities
18
Most Sponsors Feel Some Impact from Fee Disclosure
Source of chart data: OppenheimerFunds’ Post-Fee Disclosure Survey, September 2012
Significant Impact 12%
Slight Impact 63%
No Impact 16%
Too Early to Tell 10%
Significant Impact
8%
Slight Impact 45%
No Impact 36%
Too Early to Tell 12%
Impact on participants Impact on sponsors
The majority of sponsors believe that fee disclosure regulations will have an impact on both themselves and participants, with sponsors expected to be more greatly affected.
19
Plan Sponsors See More Benefits to Fee Disclosure than Drawbacks
Are there major benefits? Are there major drawbacks?
Source of chart data: OppenheimerFunds’ Post-Fee Disclosure Survey, September 2012
43%
62%
Major Benefit to Sponsors
Major Benefit to Participants
25% 27%
Major Drawback to Sponsors
Major Drawback to Participants
Pe
rcen
t o
f S
po
nso
rs
Plan sponsors see more benefits than drawbacks, with more benefits accruing to participants.
Respondents say that fee disclosure has: increased trust in providers, helped them determine fee
reasonableness, helped them carry out fiduciary responsibilities, made their lives easier and better
equipped them to talk to employees about their plan. Larger plan sponsors are more likely than
smaller plan sponsors to recognize all of these benefits.
20
Fee Disclosure Helps Sponsors Meet their Fiduciary Responsibilities
Source of chart data: OppenheimerFunds’ Post-Fee Disclosure Survey, September 2012
Plan sponsors see several benefits to fee disclosures, most notably help with meeting fiduciary responsibilities and improved provider transparency, as well as providing a better understanding of fees relative to services.
4.00%
1.00%
4.50%
7.30%
8.00%
9.00%
10.90%
11.30%
13.00%
17.20%
17.70%
0.00% 10.00% 20.00%
No Benefit to Sponsor
Other
Participants Challenge Decisions Less
Helps with Fund Lineup Decisions
Provides Material for Participant Conversations
Reduces Time Spent Gathering Information
Helps with Plan Provider Decisions
Better Understanding of Fee Sources
Better Understanding of Fees Relative to Services
Increased Provider Transparency
Helps Me Meet Fiduciary Responsibilities
What are benefits to plan sponsors?
Percent of sponsors
21
… But Fee Disclosure Consumes Time and Other Resources
Source of chart data: OppenheimerFunds’ Post-Fee Disclosure Survey, September 2012
Yet plan sponsors realize that these benefits may come at a cost in terms of the time and resources spent evaluating and implementing the requirements. Many are concerned about the level of detail, and also anticipate that employees may begin to question aspects of the plan. Advisors who can help these sponsors plot a course of action, document decisions and develop a strategy for responding to participant inquiries can help plans save time and resources.
15.00%
5.90%
10.80%
14.20%
14.50%
14.80%
19.30%
20.60%
0.00% 10.00% 20.00% 30.00%
No Drawback to Sponsor
Other
Disclosures are Not Detailed Enough
Disclosures Provide Too Much Detail
Disclosures are Costly to Implement
Participants Increasingly Challenge Decisions
Disclosures Consume Resources that Could Be Usedfor Other Plan Purposes
Disclosures are Time Consuming
Percent of sponsors
What are drawbacks to plan sponsors?
Disclosures Consume Resources that Could Be Used
for Other Plan Purposes
22
Participant Engagement Has Improved with Fee Disclosure
19%
31%
41% 45%
49% 38%
43%
54%
62%
54%
Micro Plan <100 Ees Small Plan100-499 Ees Mid-Size 500-999 Ees Large Plan 1.000-4,999 Ees Mega Plan 5,000+ Ees
Employee Engagement Before Fee Disclosure Employee Engagement After Fee Disclosure
The fee disclosure regulations have cast a spotlight on retirement savings plans. This has had a
positive result—a marked increase in engagement among employees. Plan sponsors, providers
and advisors should take advantage of this heightened level of engagement to drive saving and
investment messages designed to improve retirement funding success.
Employee engagement before and after fee disclosure
Source of chart data: OppenheimerFunds’ Post-Fee Disclosure Survey, September 2012
23
Fee Disclosure Benefits Participants
Source of chart data: OppenheimerFunds’ Post-Fee Disclosure Survey, September 2012
The fee disclosure regulations have helped plan participants feel more educated about the plan and helped instill greater trust in plan sponsors—among other benefits. These regulations have the potential to energize discussions about retirement savings─rather than just fees─and further engage participants to potentially improve saving and investment outcomes.
9.00%
1.00%
9.90%
12.10%
13.30%
13.80%
15.40%
16.00%
18.50%
0.00% 10.00% 20.00%
No Benefit to Participants
Other
Reduces Time Participants Spend Gathering Information
Appreciation for Value of Plan
Empowered to Make Decisions
Increased Familiarity with Plan
Understand Purpose of Fees
Increased Trust of Plan Sponsors
Feel More Educated About Plan
Percent of sponsors
What are the benefits to participants?
24
… But Fees are Still Confusing
Source of chart data: OppenheimerFunds’ Post-Fee Disclosure Survey, September 2012
As the benefits to participants present an opportunity for enhanced dialogue, so do the drawbacks. Plan sponsors are particularly concerned that participants will be drawn to the least expensive investments—without regard for asset allocation, services or investment style. Educational programs that help plan participants understand fees and their context are likely to be welcomed.
23.00%
3.60%
9.10%
10.30%
16.20%
18.50%
18.60%
23.60%
0.00% 10.00% 20.00% 30.00%
No Drawback to Participants
Other
Participants are Not Sure How to Select Funds
Participants are Upset Over Level of Fees
Question Fees Without Perspective
Drawn to Funds with Lowest Fees Without Regard for Services,Investment Style
Drawn to Lowest Fees Without Consideration for Asset Allocation
Fees are Confusing to Participants
Percent of sponsors
What are drawbacks to participants?
Drawn to Funds with Lowest Fees Without Regard for Services,
Investment Style
25
Agenda Executive Summary
Importance of fees in hiring process
Pop quiz—how well do sponsors understand requirements?
Impact of fee disclosure
Opportunities
26
The New Value Imperative
Plan sponsor agreement with statements
Rating of 7 indicates that respondents agree completely with the statement
Percent of Sponsors
Rating 6 or 7 out of 7
Providers with lowest fees do not always provide best value 48%
Fee disclosures help me carry out fiduciary responsibilities 39%
The disclosures make it easier for me to assess how reasonable plan’s fees and services are 37%
Fee disclosures are a positive change 36%
Fee disclosures make my life easier 31%
I feel better equipped to talk to employees about the plan 25%
Fee disclosures are confusing 24%
Disclosures have increased my trust in providers 22%
Fee disclosures are costly 18%
Higher fees can indicate higher value 4%
Source of chart data: OppenheimerFunds’ Post-Fee Disclosure Survey, September 2012
Many sponsors realize that despite having a clear picture of fees, they still need to assess the value of
services—48% believe that providers with the lowest fees do not always provide the best value. However,
the converse is not well-accepted; only 4% of sponsors believe that higher fees can indicate higher value.
This leads to a value imperative—providers and advisors must be prepared to clearly articulate the value
they offer for the fees they charge. Indeed, fees should be evaluated in the context of the quality and the
effectiveness of the service.
27
Plan Sponsors Need Help with Next Steps
Source of chart data: OppenheimerFunds’ Post-Fee Disclosure Survey, September 2012
Despite plan sponsors’ general level of optimism and empowerment, only 20% of respondents are very confident about what to do next, and 31% either don’t know what to do, need more guidance, or claim they haven’t received anything yet. Approaching these plan sponsors with an action plan for dealing with fee disclosures provides opportunity for advisors to demonstrate their value.
I am Very Confident I Know What to Do
20%
I am Somewhat Confident I Know
What to Do 50%
I Need More Guidance on What to
Do 26%
I Don't Know What to Do 3%
I Haven’t Received Any Disclosures
2%
Which best describes how you feel about disclosures?
28
Majority of Sponsors are Looking for Help Working Through Disclosures
Source of chart data: OppenheimerFunds’ Post-Fee Disclosure Survey, September 2012
Only 22% of sponsors do not feel they need help working through disclosures. Many of the others are looking for a variety of education touch points, providing an excellent opportunity for advisors to provide real consultative support to help remove some of burdens perceived by their clients.
Materials/ Collateral 29%
Meetings/ Education/ Webinars
18% Online Education 10%
No Need for Help 22%
Not Sure 4%
Other 17%
How can advisors, investment managers and providers help sponsors?
29
Sponsors are Helping Participants Understand Fees
Source of chart data: OppenheimerFunds’ Post-Fee Disclosure Survey, September 2012
Plan sponsors have taken—or plan to take—a wide variety of actions to help participants work through
disclosures. Larger plans—likely because they tend to have more resources—are planning a more
proactive approach. Advisors and retirement plan providers are well-suited to provide many of these
services—and take the opportunity to expand the conversation beyond fee disclosure to helping improve
retirement saving and investing outcomes.
65%
56%
50%
31%
28%
31%
33%
36%
41%
34%
0% 50% 100%
Remind Employees Who toContact with Questions
Provide Materials Created byProvider
Provide Materials Created byAdvisor
Offer a Meeting to Review Fees
Add Resources to Respond toEmployee Inquiries
Have Done Plan Within Next Year
What have you done/plan to do to help participants?
Remind Employees Who to
Contact with Questions
Provide Materials Created by
Provider
Provide Materials Created by
Advisor
Offer a Meeting to Review Fees
Add Resources to Respond to
Employee Inquiries
30
Plan Sponsors Considering Many Initiatives in Response to Fee Disclosure
Source of chart data: OppenheimerFunds’ Post-Fee Disclosure Survey, September 2012
Actions Being Considered Percent of Sponsors
Renegotiating Fees with Provider 24%
Requesting More Services from Provider 23%
Requesting More Services from Advisor 20%
Changing to Funds Where Fees are Aligned to Value They Add 20%
Benchmarking the Plan 19%
Enhancing Investment Lineup Evaluation Process 17%
Renegotiating Fees with Advisor 17%
Switching to Funds With Lower Fees From Current Investment Manager 16%
Enhancing Provider Evaluation Process 15%
Switching to Funds With Lower Fees From Investment Manager Not Currently in Lineup 14%
Replacing Advisor 11%
Changing Plan Provider 10%
Decreasing Use of Advisors 9%
Plan sponsors anticipate a wide variety of actions in response to fee disclosure, chief among them
renegotiating fees with advisors and providers, along with asking for more services. There is also a fair
amount of interest in reviewing funds and lineups. Opportunity abounds for advisors and providers who
recognize the value imperative─and can demonstrate theirs.
31
Participants Expected to Flock to Funds with Lower Fees
Source of chart data: OppenheimerFunds’ Post-Fee Disclosure Survey, September 2012
80% of sponsors surveyed expect their participants to move to funds with lower fees, or at least better align their investments to reflect the best value in terms of performance and fees. Interestingly, 45% expect that these disclosures will result in participants increasing their plan contributions, a perhaps unanticipated yet very positive result of the disclosure effort.
28%
17%
11%
20%
11%
54%
49%
44%
27%
19%
Move to Funds with Lower Fees
Move to Funds Aligned withValue Provided*
Shift from Mutual Funds toOther Plan Options
Increase Plan Contributions
Decrease Plan Contributions
Have Done Expected Behavior—Within Next Year
*For example, may be willing to pay higher fees if the fund offers higher returns or better service
What have your participants done/what do you expect them to do over next year?
Move to Funds Aligned with
Value Provided*
Shift from Mutual Funds to
Other Plan Options
32
Conclusion
Plan sponsors are generally more positive about fee disclosure than one might expect. But their
knowledge of their obligations is questionable. They want—and need—help from their providers and
advisors, providing a unique opportunity to engage with both sponsor and participants.
The outcome of the disclosure regime does not need to be a “race to the bottom.” Eighty percent of plan
sponsors can identify services that they recognize as valuable─and for which they are willing to pay a
premium. Advisors and providers alike must seize the opportunity to differentiate themselves, clearly
define their value and demonstrate their expertise and their worth.
33
Disclosures
Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other
agency, and involve investment risks, including the possible loss of the principal amount invested.
This material is provided for general and educational purposes only, and is not intended to provide legal, tax or investment advice, or for use to avoid penalties that
may be imposed under U.S. federal tax laws. Contact your attorney or other advisor regarding your specific legal, investment or tax situation.
Before investing in any of the Oppenheimer funds, investors should carefully consider a fund’s investment objectives, risks, charges
and expenses. Fund prospectuses and if available, summary prospectuses contain this and other information about the funds, and may
be obtained by asking your financial advisor, visiting our website at oppenheimerfunds.com or calling us at 1.800.CALL OPP (225.5677).
Read prospectuses and if available, summary prospectuses carefully before investing.
Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc.
Two World Financial Center, 225 Liberty Street, New York, NY 10281-1008
© 2012 OppenheimerFunds Distributor, Inc. All rights reserved.
RPL0000.074.1112 November 2012