Date: May 18,=20 2005

To: = Investment=20 News

Subject: "Fee-Based Advisors Face = 401(k)=20 Boom"

Having just read your May 16, = 2005 article on=20 "Fee-based advisors face 401(k) boom," I feel compelled to = respond.

There is no question that unbiased = fee-based=20 business, transparent pricing and disclosure are increasing. = Generalists,=20 and vendors that support them, are also being squeezed while = retirement=20 advisors are increasing market share through consolidation.

Nevertheless, the article failed to = mention that=20 retirement advisors participating in consolidation will have a tough = time=20 maintaining margins and growing their income even though their = assets might=20 increase. The transition from commission-based business to = fee-based=20 business is also very unproductive for advisors and many = sponsors, and=20 their auditors, react to full disclosure as if it were a price increase. = Business continuation will also be a problem and, while some = will=20 continue to grow their business, this is a good time for advisors to = sell=20 successful practices.

More importantly, informed = insiders would=20 no doubt view the opinion expressed in the article, "80% of all = 401k plans=20 are overpriced," as a sadly misinformed observation. =20 There are always exceptions and most = plans can be=20 improved, but collectively, 401(k) plans are not overpriced on the = vendor=20 side. Indeed, most are under priced. In general, = the media,=20 sponsors and those with something to sell simply don't recognize that = few, if=20 any providers, are earning a profit or an adequate return on their = retirement=20 business. I would also note that almost fifty retirement providers = have=20 left the business in recent years and more are shopping their=20 business.

Assets are leaving retirement plans at = an=20 increasing rate, the corporate-sponsored savings vehicle is starting to=20 disintegrate and the equity market could just as easily go down as=20 up. A drop in the equity market would also exacerbate the = inefficient=20 pricing strategies still being used by many in the = industry.

While seldom acknowledged, it takes = decades to=20 learn the nuances of the retirement plans market. Multiple talents, = along with=20 evangelical passion, are required to support retirement plans. The = payoff=20 is also long-term, a reason why few specialize.

In short, sponsors need independent = advice from=20 retirement specialists, prudent processes, co-fiduciary comfort and = insulation,=20 but some aren't willing to pay for it. Advisors represent an = add-on=20 cost and while cost is important, it is only one=20 factor. Assuming a sponsor wants to work with an advisor, the = real=20 issues are what the sponsor gets for the add-on cost and how the = advisor=20 gets paid. Advisors must, however, define and articulate = their value=20 proposition to capture the sale and execute it after the=20 sale.

Phillip Chiricotti

President

The Center for Due=20 Diligence (CFDD)