The responsibility of conducting due diligence on the retirement plan advisor is a daunting tasks for most plan sponsors. Without finance and investment experience, it can indeed be difficult to periodically review the performance of a current advisor, or conduct a search for a new one. Here’s help!
Selecting an advisor (sometimes spelled adviser) is an essential duty of plan sponsors—and one that is fraught with fiduciary liability under the high standards of ERISA law. Fred Barstein, CEO of The Plan Sponsor University and other retirement plan services, points out that one way for plan sponsors to mitigate the risks associated with selecting and monitoring advisors is to secure third party review: “As litigation increases…recently targeting advisors offering proprietary investments and services, plan sponsors must conduct third party due diligence to protect themselves and their organization and make sure they are working with the right advisor for themselves and their employees….”
But even securing the right help with the duty of selecting and monitoring plan advisors can be challenging. Experts note:
The most important decision a DC plan sponsor makes is selecting an advisor, yet there are few accredited national resources available. ERISA plans have a fiduciary requirement to conduct periodic due diligence and requests for proposal (RFPs) for all providers, including record keepers, money managers and advisors, paid out of plan assets. While an RPA can help perform unbiased due diligence for other providers, they cannot for themselves. Even if very satisfied with their current RPA, ERISA plans are required to conduct documented due diligence as a prudent expert.
To fill the gap in services, Plan Sponsor University, in partnership with The Retirement Advisor University (TRAU) has announced a new service to help plan sponsors and other fiduciaries perform the required due diligence on the current retirement plan advisor (RPA) or select a new advisor: “The RPA Due Diligence Center (rpaDD) was created after numerous requests from TPSU attendees for assistance….TPSU’s rpaDD Center offers a simple benchmarking, anonymous request for information (RFI) or a full RFP. While the plan may include advisors on their own, only active C(k)Ps who TRAU monitors regularly will be eligible to respond to RFPs and RFIs.”
Plan sponsors are reminded that while they can mitigate their fiduciary obligations, they can never fully eliminate them under the high standards of ERISA law. That’s why, regardless of choices made related to the services of investment professionals—and those who help select and monitor those professionals—it’s critical for plan sponsors to protect themselves from personal liability. Colonial Surety is here to help with an affordable Fiduciary and Cyber Liability Insurance Pack that arms you with:
- Legal defense and coverage for penalties against claims of alleged or actual breaches of fiduciary duties.
- Defense against lawsuits and regulatory actions related to a cyber breach.
- Expert-led response, notification and crisis management services to prevent a cyber incident from spiraling into a disaster.
Our Fiduciary with Cyber Pack is now available with a one year commitment—and the annual fee is less then one hour of expert legal defense if a lawsuit or regulatory challenge strikes you and your business. Let’s get you covered, in minutes, today: Protection for Plan Sponsors.
Words for the Wise: Adviser or Advisor?
Don’t get caught in spelling challenges when it comes to understanding the fiduciary obligations of a financial professional. Some financial professionals describe themselves as “advisers,” while others use “advisor.” Experts explain why—and emphasize that the important word to look out for and understand is actually fiduciary:
Because the Investment Advisers Act of 1940 uses the “er” spelling, there’s some feeling that “registered investment adviser” and “investment adviser representative” should be spelled with the “er” because that’s how the law is written. (But not everyone does this.) When evaluating advisors (or advisers), the important word to look for is “fiduciary.” A fiduciary has your best financial interest at heart, regardless of how they choose to spell advisor.
It’s best practice, whenever selecting professionals to provide guidance and services on a retirement account, to obtain a statement in writing about what, if any, fiduciary responsibilities are being undertaken. When selecting and monitoring service providers, plan sponsors also need to remember that the DOL’s Cybersecurity Guidance instructs them to inquire about the cybersecurity protocols in use.
Realistically, even with great diligence, plan sponsors can never fully eliminate the possibility of a cyber breach—or the risk of being held personally liable for fiduciary breaches—like failure to adequately monitor service providers. That’s why it’s unwise for plan sponsors to take unnecessary risks. The annual cost of Colonial’s Cyber and Fiduciary Liability coverage is less than the fee for one hour of expert legal defense if a lawsuit or regulatory challenge strikes you and your business. Get covered, in minutes, today:
Pension plan professional? We’re here to help you with your plan sponsor clients—and we’ve got you too. From Errors and Omissions Insurance to Fiduciary Liability Insurance, Employment Practices Liabiity Insurance–and more, we’re HERE with the coverages pension professionals need to keep the business going—and growing. Insurance for Pension Professionals Right Here.
Colonial Surety was founded in 1930 and continues giving customers the assurance that they, their businesses, and their clients are safeguarded with the right surety and insurance products at all times. We are a direct and digital insurer offering products through an online platform supported with exemplary customer service. We give customers a simple, direct, and instant service that takes the pain out of buying insurance and bonds. Colonial Surety is licensed in every state in the U.S., rated “A” Excellent by A.M. Best, and listed by the U.S. Treasury as an approved surety.