Cohen & Buckmann, P.C.
Cohen & Buckmann, P.C.
EXECUTIVE COMPENSATION, PENSION & BENEFITS LAW

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EXECUTIVE COMPENSATION, PENSION & BENEFITS, INVESTMENT ADVISER LAW


 
Fiduciaries, Protect Yourselves--Hire a Great Adviser

Fiduciaries, Protect Yourselves--Hire a Great Adviser

                                                             By Carol Buckmann

Caveat emptor is a common Latin phrase meaning “buyer beware”. Now that it appears that the decision striking down the Fiduciary Rule will not be appealed to the Supreme Court, plan fiduciaries should keep that warning in mind when dealing with anyone providing investment advice.  Smart fiduciaries will take it upon themselves to make sure they are getting outside investment advice from someone who puts the plan participants first and stands behind the advice, and won’t wait for the SEC or states to protect them.

Here are some tips to keep in mind:

·       Hire an adviser who will acknowledge ERISA fiduciary status in writing. This is the highest fiduciary standard, and is separate from the standards that apply to registered investment advisers (“RIAs”).  ERISA fiduciaries can be personally liable for losses caused by a breach of their responsibilities.

·       Understand the rules that are back in effect. Brokers who give advice may not be subject to fiduciary standards at all. For example, under the so-called 5 part test that applies now, one-time advice and advice that is not a primary basis for plan decisions is not fiduciary advice.

·       Investigate your adviser’s qualifications and experience with ERISA plans. You need an adviser who works with a lot of plans and understands prohibited transactions and current plan compliance issues.  Don’t forget to check for disciplinary action or lawsuits.

·       Hire someone who agrees to attend your Committee meetings and provide regular written reports giving the basis for recommendations.

·       Hire someone who is responsive. Don’t put up with someone who doesn’t return phone calls and just puts in an appearance once or twice a year.

·       Review your adviser annually the same way you review your other service providers. Do a new rfp if you are unhappy.  Here is some advice about how to do that review:  https://401ktv.com/your-advisors-review--investments-who-reviews-them/

·       Ask about the procedures your adviser has in place to avoid conflicted advice.  Is the adviser’s fee a fixed amount or percentage that doesn't vary depending on the investments you select?

·       If your adviser became a fiduciary solely to comply with the Fiduciary Rule, find out if that has changed.

There are a lot of great fiduciary advisers out there who will help company fiduciaries fulfill their responsibilities and who hold themselves to the highest professional standards. Fiduciary Rule or no Fiduciary Rule, there is no reason for company fiduciaries to settle for conflicted or substandard advice. After all, as responsible fiduciaries, they will be left holding the bag if they follow bad advice.