Over the years, many advisors in the bank channel have discovered that marketing and advising on 401(k) plans to small and midsize employers can be an excellent way not just to pick up business, but also to cultivate productive relationships with wealthy owners of those businesses. Moreover, there are the employees who, over time, can build up significant retirement assets in their accounts.

Sounds good, right? However, recent changes in the ERISA section 404(a)(1)(A) and (B) rules regarding those tax-advantaged retirement savings plans by the Department of Labor, which oversees ERISA standards, are turning that business growth strategy into a dangerous minefield for advisors.

You could, experts warn, find yourself caught up in costly litigation down the road over hidden internal fees associated with the plans. Those fees could be for managed accounts, shared revenue between a TPM and a plan provider, or a plan provider and a constituent fund in a plan.

The key, according to both the Department of Labor and attorneys familiar with the new regulations, which went into effect last July, is the familiar fiduciary issue.

Advisors need to understand whether they are being placed, or are placing themselves, even inadvertently, into what ERISA would consider a fiduciary role with respect to either the employer who is buying the 401(k) plan, or the plan participants, or employees, enrolled in the plan.

Further muddying the waters, advisors also should note that the Department of Labor definition of fiduciary is different from the FINRA definition.

Typically, a financial advisor is allowed to have a conflict of interest in offering financial advice, but must disclose it.

Under ERISA, however, an advisor is not supposed to have any conflict of interest and must act in the interest only of the plan participants (Department of Labor rules also make fiduciaries personally liable for plan participant losses).

Gretchen Obrist, an attorney with the Seattle-based plaintiff law firm Keller Rohrback, says advisors cannot simply point to the literature that comes with a 401(k) plan explaining its internal fee structure.

She says if advisors are selling a plan to an employer, and are earning commissions for offering advice about choosing one plan over another, "they could be putting themselves into a fiduciary position."

In that case, she says, it would be crucial for the advisor to understand and to be able to articulate all the internal fees built into a plan, because under the Department of Labor's new regulations, such fees need not only to be "reasonable," but also need to be clearly explained.

Among the internal fees advisors should be conversant with in any plan they are promoting are: sub-fees of the mutual funds that make up typically half or more of a 401(k) offering; and revenue sharing, also known as sub-transfer or shareholder servicing fees, which are provided to a third party for administrative services such as record keeping and which are generally built into a plan's expense ratio.

Then there are 12b-1 fees, which deal with the ERISA rules concerning the marketing and distribution costs that are generally paid as commissions to brokers who service retirement plans, as well as to other agents such as recordkeepers or insurance companies.

Ignorance about such fees won't be an excuse if the advisor is marketing the plan and expecting to get a commission for it.

"You can't say you don't know," says Obrist. Moreover, even full disclosure may not be enough. "If fees are too high, you could be liable even if you disclosed them," she warns.

In addition to violating new Department of Labor 401(k) transparency regulations themselves, there is also the risk of an advisor being dragged into a lawsuit over fees.

If there's any financial compensation involved," explains Obrist, there could be a "cause-of-action," if, for example, an employee were to sue on a claim of excessive fees or hidden fees in their 401(k) plan.

She adds that if the advisor thinks a plan promoting to employers has excessive internal fees, or if there is any hint of self-dealing in the relationship between any of the parties-the plan provider, the broker-dealer, the bank or the plan sponsor-the advisor "shouldn't touch it with a 10-foot pole."

Jerry Schlichter, an attorney who last year won a $50 million judgement on 401(k) fees against the construction supply company ABB (currently on appeal), says, "401(k) plans are becoming a treacherous minefield for advisors."

He adds, "As plaintiffs' attorneys we would always sue the advisor along with the plan provider."

That's not the exception, that's the rule, others say. James W. Watkins, CEO and manager of InvestSense, says that advisors who dabble in the 401(k) space should be aware that plaintiffs' attorneys who bring lawsuits in hidden or excessive fee cases are likely to include them in any case they bring.

"Plaintiff's attorneys will always add the individual to a lawsuit, even if their real target is the broker-dealer, which is where the money is," he says.

Watkins notes that registered investment advisors, who frequently serve as fiduciaries of 401(k) plans, have to be particularly careful under the Department of Labor's new fee disclosure rules to explain them to plan sponsors. But he warns that it would be "wise" even for any advisor who is promoting 401(k) plans to employers-not just RIAs-to disclose all the hidden fees in the plans, including any compensation they are getting for selling the plans.

He says, "Typically, with smaller 401(k) plans, the plan provider sends them out with a packet that discloses everything. They tell the advisor, 'Don't deviate from the packet. Tell them everything is explained in the packet.'"

In such cases, he advises, "If the sponsor or the participants ask for more detail, tell them the name and number of an expert at your broker- dealer to call.

Don't try to answer questions or to say things yourself. You can say it's a good plan, but don't go beyond that. Follow the script."

Watkins says an advisor can answer general questions such as the difference between a 401(k) plan and an IRA, but should avoid going into details of a specific 401(k) plan, leaving that task to experts back at the home office.

"Broad brush information is good, narrow brush not so much. Don't do detail painting," he says.

"This is all becoming a much bigger issue with the new DOL regulations," says James Holland, director of business development at Millennium Investment & Retirement Solutions of Charlotte, N.C.

"If you don't have a solid ERISA background and understand your responsibilities in marketing a 401(k) plan to employers, you are taking a tremendous risk. This is becoming a hot-button issue."

He suggests that advisors who promote 401(k) plans should "over-document that you have explained all the fees in a plan, and get the employers to date and sign documents expressly stating that you have outlined them. Without that it's just he-said-she-said."

Senior executives at most of the biggest TPMs, including Raymond James, Cetera and LPL, say they have legal experts working to ensure compliance with the DOL's new transparency rules.

That's not necessarily comforting news for advisors, though, who need to recognize that in the case of a plaintiff lawsuit over 401(k) fees, their interests and the interests of their broker-dealer might not coincide, which might require them to hire their own attorney.

Invest Financial's vice president and compliance officer Gabriel Ayala said his firm is urging its advisors, if they are doing 401(k) consulting, to be very specific about what they are and are not going to do for the plan sponsor, to have a signed contract making that clear, and to stick to its terms. "They can get in over their heads," he warns.

If advisors are going to play a fiduciary role under ERISA rules, he says, Invest requires them to obtain an Accredited Investment Fiduciary designation.

The company offers training through a subcontractor, fi360, a fiduciary training firm.

"We don't restrict our advisors from 401(k) business," says Ayala, "but we do want to keep them safe from liability."

If all this sounds a bit nerve-wracking, just wait for what's coming. The DOL is trying again to establish new regulations relating to schemes to rollover 401(k) plans into IRA products.

This is a fairly lucrative area of business for many bank reps, but it is likely to become much less attractive if, as the DOL appears to be hoping, the definition of fiduciary is broadened to include giving advice to 401(k) plan participants about enrolling in a particular IRA product.

Chris DiMattio, an Invest advisor working out of the FNCB bank in Dunmore, Pa., predicts that those advisors who just have a couple of 401(k) plans are likely to get out of the business because of the new regulations.

But he says that will work to the advantage of those advisors like himself who have made 401(k) business a specialty and who develop the necessary expertise to handle the tougher new fee disclosure requirements (and the increased DOL auditing).

"You're working a lot harder now for a lot less compensation," he says, "but it's still a good business because of the relationships you build." He adds, "You have to love this work."