Retirement Plan Advisors Must Adapt to Changing Industry

Saturday, September 15, 2018

By Eric Sholberg, AIFA

The regulatory environment in the retirement plan management space is ever-changing, from fee disclosure changes to the recently vacated “fiduciary rule” to the newly proposed SEC “Regulation Best Interest” rule. Although these developments have created much confusion and uncertainty, both the core fiduciary duties and the liabilities plan sponsors expose themselves to in failing to fulfill those duties remain clear.

Many retirement plan sponsors believe that by outsourcing the administrative and investment recommendation functions, they have adequately protected themselves against any and all liability. However, ERISA dictates that the plan sponsor is ultimately responsible for making sure that the plan meets all the required fiduciary standards.

The result has been more responsibility, accountability, liability, and litigation for companies and plan sponsors.

The plan sponsor is ultimately responsible for making sure that the plan meets all the required fiduciary standards.

The best way to limit your risk is to make sure your retirement plan advisor is willing to meet the changing requirements of the industry and the changing needs of your business and your employees. The harsh truth is that many plan advisors servicing a 401(k) plan are resistant to change. They shirk fiduciary duties and merely want to do the bare minimum (meet with you 1-2 times per year, recommend fund changes, etc.) on their way to collecting their fee. Does this sound like your plan advisor?

As a plan sponsor, you should be asking your plan advisor for more. Your plan advisor should be a value-added part of your retirement benefits, a true partner to your benefits team, an extension of your committee/plan sponsor, and a proactive resource for your employees. In addition to making sure your advisor is conflict-free (not tied to a fund company, a bank, a brokerage, or an insurance company)—not to mention objective, transparent, and willing to work with your employees—we recommend you have an advisor who is willing to help you limit your liability, manage the plan, and help you meet your fiduciary obligations.

Reducing Your Liability

Everyone calls themselves an advisor, but the truth is not all advisors are the same. There are brokers, insurance providers, banks, independent consultants, and Registered Investment Advisors who all label themselves as retirement plan “advisors.” Some will operate as a fiduciary, some will operate as a partial fiduciary, and some won’t take a fiduciary stance at all. Understanding your agreement with your advisor is really the only way to tell if they are taking a fiduciary stance and, if so, at what level. The reality is, only a contractually named 3(38) investment manager gives plan sponsors the ability to reduce the risk associated with selecting, monitoring, and replacing investments.

Your plan advisor should be a true partner to your benefits team and a proactive resource for your employees.

Plan Consulting and Management

Doing your full-time job while also meeting your fiduciary obligations as a plan sponsor can be challenging, to say the least. Your plan advisor should be helping you manage the plan to stay in compliance, provide plan consulting to maximize the benefit, and educate and support your employees. Plan sponsors should be asking their advisors for services like:

  • Plan design
  • Plan document review or creation
  • Vendor selection
  • Vendor management support
  • Benchmarking vendors
  • Documentation
  • Fiduciary document organization
  • Regular review meetings
  • Plan health scorecard and plan goal setting
  • Employee surveys
  • Employee financial education
  • Direct employee support
  • Ongoing fiduciary education
  • Regulatory updates

These services should no longer be discretionary, but a part of every plan sponsor’s requirements of their retirement plan advisor.

Is your plan advisor helping you meet your fiduciary obligations or are they just collecting a fee?

For advice specific to your situation, contact Brighton Jones today and download our Fiduciary Checklist to learn more.

Eric Sholberg, AIFA serves as a retirement plan advisor at Brighton Jones.

Read more from our blog:

New on Our Blog

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Brighton Jones LLC), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained on this blog serves as the receipt of, or as a substitute for, personalized investment advice from Brighton Jones LLC.

To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Brighton Jones LLC is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Brighton Jones LLC’s current written disclosure statement discussing our advisory services and fees is available for review upon request.

Brighton Jones is not affiliated with Facebook, Twitter, LinkedIn, Google+, YouTube or other social media websites and we have no control over how third-party sites use the information you share. Please remember that you should never communicate any personal or account information through social media and it is important to familiarize yourself with their respective privacy and security policies.

Pin It on Pinterest