Whether driven by the rash of DC lawsuits, the DOL conflict-of-interest rule or fear of fines and audits, plan sponsors are more concerned about their fiduciary liability.
Rarely does a member of the investment committee of a small or mid-size company have adequate knowledge on how to be an ERISA fiduciary, never mind how to run a plan. That’s why they hire advisors, TPAs, record keepers, attorneys and CPAs to help. But that’s not enough – they need to understand what these vendors do (or are supposed to do), whether they are qualified, and whether they are adequately discharging the duties they were hired to perform. Concerns about conflicts of interest and revenue sharing deals they don’t fully understand are growing, along with concerns about older workers not prepared to retire who keep working and thus compromise the company’s competitiveness.
While the new DOL conflict-of-interest rule offers many opportunities for so-called Elite plan advisors (those with more than $250 million in assets under advisement, 10 plans and 10 years in business), it also provides challenges beyond mind-numbing paperwork and administrative details. Elite advisors in the past had been able to distinguish themselves simply by declaring that they were willing and able to act as ERISA co-fiduciaries. In the future, under the new DOL rule, acting as a fiduciary will be the floor, not the ceiling. So in what ways can Elite advisors distinguish themselves?
How about creating a standardized fiduciary training curriculum for members of clients’ and prospects’ investment committees? It’s unlikely that less experienced advisors are capable of providing this type of training, and it’s highly unlikely that their broker/dealers would allow it.
As DC plans receive more scrutiny and attention from lawmakers, lawyers, the press and high-level executives, plan advisors have to adapt and to embrace change, not keep doing what they did in the past. Providing fiduciary training to investment committees, looking for ways to get rid of revenue sharing, and focusing on helping people retire “on time” might be a good start.
Opinions expressed are those of the author, and do not necessarily reflect the views of NAPA or its members.
