Do you use your personal advisor rather than a retirement consultant to guide your plan? Do you think that all financial advisors are essentially the same? The Employee Retirement Income Security Act (ERISA) states otherwise. The law states that investment management for managing other people’s money is about a prudent process. While you may not see yourself as an investment fiduciary, if you are deemed a fiduciary on your company plan, you are one.
The vast majority of professionals called a financial advisor, do so as a stockbroker, an investment salesperson. Unless they are registered as an investment advisor representative they are NOT giving advice. Further, a smaller number of those investment advisor representatives have done advanced study on retirement plan investing.
Do-It-Yourself or hire a retirement consultant?
These 10 questions may help you in that decision.
- Have you had formal fiduciary education, such as that from the center for fiduciary studies? Do you have sufficient time to dedicate to investment monitoring
- Do you have sufficient time to monitor your service providers?
- Do you have time to keep up with auditing your compliance with administrative rules?
- Do your participants performance results compare favorably with a plan benchmark, such as standard and poor’s 500?
- Is your participation rate 90% or above
- Are your participants saving a minimum of 10%
- Are 90% of your participant’s invested in a professionally managed portfolio by an ERISA investment manager
- Are the majority of your participants on track to retire at their normal retirement age?
Retirement consultant as a non-accidental fiduciary
An investment fiduciary is someone who is managing the assets of another person and stands in a special relationship of trust, confidence, and/or legal responsibility. A fiduciary is required by law to always act in the best interests of their retirement plan participant and their beneficiaries. Are you aware of your duties and responsibilities?
Generally speaking, Investment Fiduciaries can be divided into three groups based on the primary role each serves in managing the money of others.
Investment Stewards (you) are fiduciaries who manage the overall investment decision-making process of the portfolio.
My definition of a Retirement Consultant
Like you, investment advisors (Retirement Consultant) manage the investment process. The primary difference is that Advisors are regulated investment professionals regulated by their state or the Securities and Exchange Commission. They provide comprehensive and continuous advice. Their titles may say retirement consultant, financial advisors etc. Ask your advisor if they are fiduciary and if so, show you in their contract.
You can rely upon investment advisors trained in ERISA regulations special expertise and services that help them address their responsibility to manage the overall investment strategy. There are companies that offer retirement consulting, but do not take on any fiduciary responsibility.
Hiring an Investment Fiduciary Retirement Consultant
You have the authority to hire investment advisors, technically ERISA 3(21) investment advisors. You can hire multiple. You are responsible for selecting them wisely and monitoring their performance. The Advisor assumes some level of liability from the steward. For example, under the Pension Protection Act, a sponsor can hire a fiduciary adviser to assume some liability for the advice provided to participants.
Should you continue to do it yourself?
Professionals get in trouble when they are negligent or incompetent. The best way to manage risk is to consistently apply sound processes, in other words, exhibit fiduciary excellence. You can never abdicate your fiduciary responsibility—it can be shared with other “co-fiduciaries,” but never given away. Unless you are working with a fiduciary retirement consultant:
- Registered as an investment advisor representative,
- Accredited as investment fiduciary,
- Signs contract to be a fiduciary,
you are doing it yourself.
Is it time to find a retirement consultant?
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