Retirement Plan Governance: More Than Just Hiring a “Fiduciary”
Why hiring a specialized retirement plan consultant is worth every penny
The financial advisory industry has had a lot to say regarding the Department of Labor (DOL) Fiduciary Rule or “fiduciary standard” over the past few years. During this time many advisory firms altered their approach to retirement plan management. These procedural changes were often aimed at increasing an advisory firm’s bottom line and/or mitigating its own advisory risk under the guise of being strong-armed by the DOL. A few samples of these procedural changes are:
- Adjusting their advisory fee structure to pay for the additional risk associated with this rule
- Hiring outside fiduciaries at an additional cost to the client
- Switching vendors altogether
Recently the 5th Circuit Court of Appeals struck down the DOL Fiduciary Rule. This leads me to a few thoughts: Since the fiduciary standard was never actually implemented, what was all the preemptive fuss about? Furthermore, is hiring a fiduciary enough to protect you as a plan sponsor?
The perception of many plan sponsors is that hiring a fiduciary removes their risk in offering a plan to participants. In fact, advisors, trust companies, and service providers often spread this myth. However, the DOL states, “Even if you hire a financial institution or retirement plan professional to manage your plan, you retain some fiduciary responsibility for the decision to select and keep the service provider. You should document your selection process and monitor the services provided to determine if you need to make a change.”*
This statement clearly outlines the importance of process and documentation of all decisions pertaining to your retirement plan management.
This topic was recently discussed at the annual National Association of Plan Advisor (NAPA) conference. Plan sponsors consistently stated that they would like assistance with plan governance, including, for example, the following items:
- Investment Policy Statement
- Education Policy Statement
- Fee Policy Statement
- Vendor Management Documentation
- Committee Meeting Charter
- Committee Meeting Notes
- Committee Voting Procedures
- Review of Operational Procedures and Responsibilities
- Documentation of 3(16) Fiduciary Duties
Ask yourself, is your current advisory team discussing all of these items with you? If not, you’re not alone. However, you do have options. Make sure you’re working with retirement plan specialists who are acting in your best interests, guiding you through the necessary processes, and ensuring your risks are properly assessed. Hiring a “fiduciary” is not enough.
Contact a M3 Financial Retirement Plan Consultant to learn more.
Investment advisory services offered through M3 Financial, a registered investment advisor and separate entity from M3 Insurance.