Putting others interest ahead of yours, a fiduciary responsibility, is typically associated with acts of heroism. On Easter Sunday, I listened to the Pat Tillman story on ESPN. Pat Tillman was an NFL football player that turned down a multimillion dollar contract to go and fight for our country post September 11. A decision that he gave the ultimate sacrifice for, his life. While you are not expected to give your life in the service of retirement, your fiduciary responsibility is actually spelled out by law. The following provides a few of the duties that ring loudly to me.
Fiduciary responsibility of loyalty
I’m always struck by the term duty of loyalty. What does loyalty mean to you? If you are a CFO or CEO your duty, your primary duty is to look out for your shareholders. Unfortunately if you are one of the fiduciaries on your retirement plan you also have a duty of loyalty to your employees that participate in the retirement plan. Would a loyal fiduciary have the retirement plan provider charge the plan more in order to have the employees cover the plan fees? While it sounds like a great idea for the shareholders it’s not a good deal for the participants. That is what the courts founds the fiduciaries of the ABB plan guilty of doing.
Fiduciary responsibility of care
As a company employee you’re expected to do due diligence prior to making purchases for the company. To spend the company’s money wisely. The Department of Labor expects that that same level of care would be done when evaluating retirement plan choices for your employees. You likely have don’t have the same cell phone provider that you had eight years ago considering you have probably changed your phone multiple times as the phone has gotten better. Same goes for the computer and the operating system as you expect more and more productivity. Have you done that same level of due diligence with respect to your service providers? Are there better contracts and services that would benefit your employees?
Fiduciary responsibility of prudence
The law says you are to act as a prudent person would with the relevant skills and knowledge. Have you taken any classes on investments? Have you sought out consultants and experts are gone to conferences like the Plan Sponsor conference? If you are relying simply on a provider’s interest that is not of a fiduciary nature then it’s possible that you are only hearing the side of the story that best enhances their profits and not necessarily those of your participants.
Fiduciary responsibility to use outside experts
One of the things that I strongly believe in is fiduciary outsourcing. So does my buddy at Scott Simon who writes a column for Morningstar on fiduciary issues. You may want to Google him. He literally wrote the book on prudent investing, “The Prudent Investor Act”. He talks about several varieties of fiduciary outsourcing- you can choose to hire an independent fiduciary, section 404B who will take on the liability for provider selection investment selection and monitoring and administrative tasks. You can also choose a discretionary trustee will take on many of those functions as well.
Given your time constraints I recommend leveraging the help of an ERISA 3 (21) co-fiduciary investment advisor. Pick one that believes success lies in seeing that participants retire independently. This person can help you simplify but not oversimplify the interconnected issues of retirement planning. Look for credentials such as Accredited Investment Fiduciary, CERTIFIED FINANCIAL PLANNER™ professional and Professional Plan Consultant™. Envision 401k Advisors qualifies as an ERISA 3(21) retirement plan consultant through LPL Financial. Its Retirement Plan Consulting Program (RPCP) has been certified by the Centre for Fiduciary Excellence, LLC (“CEFEX”). CEFEX is an independent global assessment and certification organization that is dedicated to helping investment advisors and investment managers apply the highest standards of fiduciary excellence in their investment process, governance, risk management and operational processes.
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