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Crowdfunding—the practice of funding a project or venture by raising monetary contributions from a large number of people via the internet—has in the past three years emerged as a game-changing concept.

The time is ripe to use crowdfunding to disrupt the fundamentally-flawed pension and retirement plan paradigm that has failed the nation’s retirement savers for decades. The existing paradigm, which specifically excludes the very individuals whose money is at risk, never did make any sense. Participants allowed no voice whatsoever in how the plans in which they invest are structured, or managed? That’s the way it’s been for over fifty years.

Through crowdfunding, our nation’s retirement plans can be dramatically improved virtually overnight. The optimal time for change would have been long ago—before the collapse of thousands of corporate pensions, severe public pension underfunding and the failure of 401(k)s to deliver retirement security as promised. For sure, paradigm shift in retirement planning is long overdue.

On the plus-side, today there is broad consensus among stakeholders (and regulators) that radical change is necessary. Also, pervasive deficiencies in plan structures, investment options and assumptions are more apparent than ever. Market recovery aside, the nation is still feeling the pain of retirement industry abuses.

• Crowdfunding As A Force For Good Versus Fraud

In 2013 the crowdfunding industry was responsible for between $3 and $5 billion in funding. That’s an impressive amount of fundraising for a concept that essentially didn’t exist until 2012.

Since the outset of the movement, some securities regulators and consumer and investor advocates, including the AARP. the Consumer Federation of America. and the Council of Institutional Investors. have been concerned about the potential for fraud related to crowdfunding. Labor unions, including the AFL-CIO. AFSCME. and the National Education Association have noted their reservations.

It was obvious to these organizations that crowdfunding might be used to fleece the public. As a former SEC attorney, there is no doubt in my mind that the risks to the public crowdfunding poses are very real and substantial.

However, in my discussions with regulators and labor unions, they have been pleasantly surprised to learn that crowdfunding can be used to actually combat investment wrongdoing and potentially improve investment outcomes.

• “Old School” Funding Of A Retirement Plan Investigation

Over the past 30 years I have investigated over $1 trillion in retirement plans for conflicts of interest; excessive and undisclosed fees; investment underperformance and wrongdoing.

Prior investigations include the state of Rhode Island. state of North Carolina. state of Kentucky. the Alabama State Employees Pension, Wal-Mart, Cities of Nashville and Chattanooga, town of Longboat Key, Caterpillar, Boeing, Northrup Grumman, John Deere, Bechtel, ABB, Edison, Shelby County, Tennessee and the US Air Pilots Pension.

Each of these investigations was funded by a single interested party, e.g. the plan sponsor or a large employee group. For every retirement plan investigation I have successfully completed, there are dozens of retirement plans I have been asked by participants and other stakeholders to look into.

The perennial question has been: who’s willing and able to pay for an in-depth expert investigation? A second opinion, if you will.

Today participants pay the cost of the financial advisers their employers hire to handle plan matters yet lack access to experts of their own choosing to review decisions that are supposedly made solely with their best interests in mind. Lacking plan-specific information and expertise, participants are incapable of weighing-in on plan matters even if they wanted to. And, as mentioned earlier, the existing paradigm does not permit participant input.

• Crowdfunding Ends A Longstanding Stand-Off

While few participants or stakeholders can afford to hire a nationally-recognized investment expert on their own, through a crowd-funding platform I developed investigatemyretirementplan.com. participant or stakeholder dollars can be combined to fund a high-impact independent review at a far lower cost than an employer would pay. I know it can be done because I’ve been doing these investigations for over 30 years.

Of course, you don’t have to be a worker or participant to contribute to an investigation. For example, taxpayers and other interested parties may wish to fund reviews of state and local pensions. Donors to a charity may wish to fund an investigation of its investment practices prior to making a donation.

Greater transparency, lower cost and better investment performance ​is the goal.

• Impact of Crowdfunding Investigations On Retirement Plan Sponsors

So what does this mean for public entities and companies that sponsor or offer retirement plans for their workers? Crowdfunding may cause some of these plan fiduciaries to lose sleep.

In the past sponsors could rest assured that, short of class action litigation brought on behalf of participants, or (even more unlikely) regulatory intervention, their mismanagement of retirement plans would not be challenged—or even noticed. Not so anymore.

As crowdfunding of investigations becomes a reality, retirement plan sponsors will have to recognize that, welcome or not, meaningful input from workers may be forthcoming.

On the other hand, some employers may welcome an admittedly unsolicited, yet gratuitous, expert critique of the plans they offer, as well as recommendations for improvement.

Fixing deficiencies brought to the attention of plan fiduciaries should be far preferable to being sued.

State and local public pensions

In every state and many counties and cities in America, pensions have been established for government workers. The Federal Reserve reported that as of June 30, 2014, state and local defined benefit assets are $3.70 trillion, which is held in trust in almost 4,000 plans for 15 million working and 8 million retired employees of state and local government.

Many of these public pensions are in fiscal crisis—severely underfunded and mismanaged, as well as mired in controversy. As a result, the stakeholders in these pensions, including state, county and city workers, as well as taxpayers who pay into the funds, are deeply concerned about the management of these plans.

Public pensions are not subject to any comprehensive federal regulation (such as ERISA); have boards of trustees that generally lack investment experience; are susceptible to political pay-to-play schemes and are increasingly investing in the high-cost, high-risk secretive hedge and private equity funds.

Those who believe public pensions should be accountable to the public regarding their investments, may want to contribute to crowdfunding an investigation.

Private Corporate Pensions

The percentage of workers covered by a traditional corporate pension plan has been steadily declining over the past 25 years. Many employers have frozen their pension plans and experts expect that most private-sector plans will be frozen in the coming years. The future of pensions remains uncertain as even employers with financially healthy pension plans consider whether to eliminate them over time.

Corporate pensions are tied to employers who bear the responsibility for ensuring that employees receive pension benefits. As companies continue moving away from their pension obligations, workers and retirees must closely monitor pension developments.

Blindly trusting that pension benefits will be paid to workers by a former corporate employer through decades of retirement is no longer an option.

For the thousands of pensions that become insolvent and the Pension Benefit Guarantee Corporation acts as a federal backstop, there will be no final forensic investigation of potential wrongdoing—unless it is funded by participants. The PBGC has adamantly refused to conduct fiduciary breach investigations of failed plans– despite the agency’s statutory and fiduciary duty.

My review of the US Airways Pilots Pension was the first forensic review of a failed corporate pension trusteed by the PBGC. Workers who want to know which Wall Street firms contributed to (and profited from) the demise of their failed pension plan, may consider launching a crowdfunded investigation.

According to the most recent statistics provided by the U.S. Department of Labor, there are 638,390 defined contribution retirement plans in the United States with total assets of $4.5 trillion, the overwhelming majority of which are 401(k) plans covering more than 88 million participants.

Most full-time American workers and employees of large companies have access to, and participate in, 401(k) defined contribution plans.

In recent years more than two dozen class action lawsuits related to 401(k) excessive plan fees and other forms of mismanagement have been filed—some of which have been settled—against some of the largest companies in the world. For example, Lockheed Martin just last month agreed to pay $62 million to settle an excessive fee case. WalMart agreed to pay $13.5 million. The United States Supreme Court is now hearing arguments related to excessive fee cases.

In a defined contribution plan, all risk rests with the participants who have no say in the design of the plan or the economic arrangements entered into with and among providers of services to the plan. Generally participants pay most, if not all, the costs associated with the plan and their investment results depend upon the performance of service providers chosen for them.

Unfortunately, of all the parties involved with defined contribution plans, participants (whose monies are at risk) are least knowledgeable regarding complex, opaque investment management industry practices. Given that the majority of participants work 40-60 hours a week, it is unreasonable to expect that they will (in their spare time) acquire the expertise to skillfully sift through the numerous investment alternatives that have been provided to them and craft an optimal retirement savings program.

Plan sponsors are more knowledgeable than participants but since few have full-time employees with investment expertise responsible solely for the employee savings plan, an overwhelming majority of sponsors rely upon providers for turnkey solutions to plan needs. These providers largely control the flow of information to sponsors and are responsible for communications to participants. Not surprising, providers of services to plans have taken advantage of their “informational advantage” and the inability of sponsors and participants to commit time to scrutinizing economic arrangements between providers and plans.

Providers have prospered even as participants have suffered mediocre results. Sponsors, freed of liability related to these plans, have little incentive to intervene and improve plans.

Unfortunately, it’s up to workers (whose retirement security is at risk) to give employers the information needed to effect positive changes to their 401(k)s

457 and 403(b) deferred compensation plans

Many state and local government, as well as public school and university workers are offered the opportunity to invest in what are commonly referred to as 457(b) or 403(b) plans. These defined contribution retirement plans permit largely public sector workers to defer a portion of their compensation.

To be sure, 457 and 403(b) investors generally are also participants in public pensions which will be their retirement mainstays, but pension benefits are being trimmed and likely will continue to be. A well-managed 457 and 403(b) is more important than ever.

The 457 and 403(b) marketplace is an investment backwater. Whomever is supposed to be making decisions and watching over these plans, generally isn’t, and often is unaware he or she has a legal, not to mention moral, obligation to establish an investment program that is good for participants.

It seems all eyes are on the defined benefit pension and rarely is anyone focused upon the deferred compensation plan. If no one at the employer is watching over the plan, then who is?

Participants, whose money is at risk, need to be.

Thanks to crowdfunding, the days of workers being forced to passively accept costly, conflict-ridden, investment schemes that undermine their retirement goals may be coming to an end. There is a way to fix our nation’s flawed retirement plans and, in my opinion, empowering participants through crowdfunding is the key.