Investment Professionals: What’s The Deal?


It makes good sense for retirement plan sponsors to contract with an investment professional for guidance on the plan. Unfortunately, many plan sponsors are unclear on what, if any, fiduciary responsibilities the investment professional is accepting. Experts share advice about getting to clarity—and monitoring.

First Things First: Adviser or Advisor?

There are different types of financial professionals who may be contracted with to advise on the retirement plan investments, but not all have a fiduciary obligation to their clients—only Registered Investment Advisers (sometimes spelled Advisors) do. As Forbes explains: “Fiduciary responsibility is important because it ensures that the person managing your money is also making the best choices for you in terms of products and fees. As fiduciaries, RIAs are legally obligated to put your interests above their own and to disclose any potential conflicts of interest.” On the contrary, non-RIA advisors operate on a lesser standard, based on suitability. Learn more about RIA here.

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.


Get It In Writing

Let’s face it: plan sponsors are busy running their businesses—and it is especially challenging for small business leaders to run the business and the plan. That’s why it’s important to understand the fiduciary responsibilities a financial professional is taking on—and experts at Fiduciary News offer this guidance:


As a plan sponsor, do you know the level of fiduciary responsibility your investment provider accepts for your plans investment decisions?” says Jeff Coons…at High Probability Advisors.…You may rely on your providers or advisors recommendations, but can you rely on them to take responsibility for those recommendations and decisions? The best way to address these questions is to get a statement in writing as to the fiduciary responsibilities being accepted by the provider or advisor. Given the state of the retirement world today, ‘get it in writing!’”’


Do plan sponsors know if their investment provider is taking on any fiduciary responsibility?” says R.L. Dick” Billings…for PCS Retirement, LLC .…If yes, what fiduciary responsibility is the provider not accepting? This needs to be reduced to a written contract.…This has to be made very clear to the plan sponsor and the underlying participants.”

  Current litigation reminds us of the importance of prudently selecting, monitoring and when necessary, adjusting the plan’s fund options “in a single-minded manner with an eye focused solely on the interests of the participants.” 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, 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:


  1. Legal defense and coverage for penalties against claims of alleged or actual breaches of fiduciary duties.
  2. Defense against lawsuits and regulatory actions related to a cyber breach.
  3. 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.


Participant Interests?

Of course in addition to managing fiduciary liability, plan sponsors must also attend to the needs and interests of participants. Experts at Fiduciary News remind us that we cannot lose sight of this while overly focusing on our liabilities:


Not enough investment advisors fully comprehend that ERISAs duty of loyalty centers around participantsinterests, not around simply avoiding liability for the plan fiduciaries,” says Matthew Eickman at Qualified Plan Advisors….This leads to a reluctance to make proactive changes and to innovate in response to participant needs and demand. Plan sponsors can avoid that drag on progress by embracing an investment consultant who does not work from a defensive position, but instead proactively prioritizes opportunities to make decisions to help participants. These types of proactive investment consultants actually better protect plan sponsors than those whose first instinct is to look for reasons not to do something.”


Another caution experts offer plan sponsors is to avoid investment providers who are too focused on driving their own business models forward. As Jason Grants of Integrated Pension Services sums up: The biggest issue with the investment providers is that theyre still mainly driven by gathering assets and so investment solutions are tailored towards what will gather the most assets, the quickest which isnt necessarily whats best for the individual participants.”


Because even careful selection and monitoring of investment professionals cannot ensure positive results, plan sponsors are advised to attend to these 5 compliance actions. It is also best practice to have—and adhere to—an Investment Policy Statement. Amid the latest storm of lawsuits against 401k plans, experts observe that when it comes to the fiduciary standard of care under ERISA law, no one is safe. While the previous tsunami of excessive fee lawsuits has disrupted even smaller businesses and their retirement plans, a new wave of litigation is shining the spotlight on the obligations of plan sponsors to ensure both reasonable fees and investment returns that benefit participants. Without coverage, even a mere allegation of a fiduciary breach against the high standards of ERISA law can be ruinous. Consider, for example, that defense costs alone are about $600 per hour. These days, a relatively minor cybersecurity incident can rapidly spiral into a fiduciary disaster too. That’s why Colonial Surety offers an affordable Fiduciary-Cyber Liability Pack. It’s now conveniently available with a one year commitment. Don’t face allegations alone—get protected in minutes here:

Fiduciary and Cyber Liability Insurance Pack

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.