MOST PEOPLE WHO HAVE EVER LOST A FIDUCIARY LIABILITY SUIT WERE POSITIVE THEY HAD TOTAL PROTECTION

In today’s world, informed employers recognize that a retirement plan must be properly set up and operated with the benefit of professional and technical advice. The Employee Retirement Income Security Act (ERISA) imposes on employers the fiduciary responsibility to prudently operate their plans and manage the investments. The employer, as the plan sponsor, and individuals who have the authority to make decisions on behalf of the plan, are fiduciaries. Fiduciaries are held to the highest legal standard. Where they are unsure of their expertise, fiduciaries must seek the advice of experts and carefully evaluate the advice given. Clearly, not all plan sponsors or their fiduciaries have the skills needed to satisfy these high standards. Fortunately, ERISA permits plan sponsors, and, in fact, requires them, to get help when they need it.

While there are a number of financial advisors eager to manage investments, plan sponsors need more than investment advice to properly manage their retirement plan. Plan sponsors need a knowledgeable and experienced advisor who can assist them with a broad array of fiduciary and non-fiduciary issues such as help with evaluating and selecting appropriate investment options and service providers, meeting ERISA compliance standards, and helping employees achieve retirement readiness—all while mitigating fiduciary risk.

This site outlines factors that the plan sponsor should consider when choosing an advisor or consultant to help them fulfill their ERISA obligations. While the marketing departments of financial service companies provide a great deal of literature on the value of an advisor, the material is often designed to sell product, not to help the plan sponsor find the most qualified advisor for their retirement plan. Most small to medium size retirement plans are served by “generalist” or “non-fiduciary” advisors that are rarely in the best position to add the appropriate value to the plan sponsor. Company-sponsored retirement plans are under intense scrutiny, and generalist/non-fiduciary advisors tend to increase a plan sponsor’s liability. While the plan sponsor cannot completely eliminate their fiduciary responsibility, company AND personal liability may be significantly limited through the use of ERISA safe harbors and the appointment of a qualified fiduciary advisor.

Regardless of plan size, ERISA requires that plan sponsors have sufficient information to make informed decisions about the services, costs, and qualifications of the advisor. The selection of a plan advisor is a fiduciary decision, and the plan sponsor may be held personally liable for failure to use a prudent process in evaluating, hiring, and monitoring their advisor. As a result, it is critical that plan sponsors perform proper due diligence when considering the services of a plan advisor.

How does the plan sponsor know how to find and select a qualified advisor? What specific characteristics should the plan sponsor look for in an advisor? In other words, what are the qualities and services that will set a qualified plan advisor apart? Many plan sponsors find the search for a qualified advisor challenging for a number of reasons, including:

• There is a knowledge gap – plan sponsors are at a disadvantage when they don’t know what they don’t know. As a result, a friend or relative of a company employee or an advisor with exceptional “sales” skills may be chosen over an exceptionally competent advisor that improves plan value, enhances participant outcomes, and reduces liability for the employer and its decision-makers.
• Many plan sponsors don’t know the questions to ask, nor do they have the proper tools or experience to properly evaluate the answers, the proposal, or the advisor.
• There is a shortage of time, and although ERISA requires plan sponsors to have sufficient information to make informed decisions about the services, costs, and qualifications of an advisor, few plan sponsors perform proper due diligence when evaluating, hiring, and monitoring their advisor.

This site focuses on key questions that the plan sponsor should ask of their current advisor or any advisor that is being considered for hire. Used in conjunction with the Retirement Plan Advisor Comparison Checklist, the plan sponsor will be in a better position to know how to select the right advisor.