Advisers’ Responsibilities to Plan Sponsors Extend Beyond Investments

With increased litigation, a new fiduciary rule and a new presidential administration, retirement plan sponsors should evaluate the services provided by their advisers.

By Lee Barney | November 30, 2016
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The Department of Labor’s (DOL’s) new fiduciary rule should prompt retirement plan sponsors to take a closer look at the services their advisers are providing, experts say. There are seven areas where sponsors should expect in-depth services from their advisers.

The most essential support that advisers should be providing is detailed oversight of the investment lineup, followed by compliance and fiduciary protection, analysis of fees, provider evaluation, participant education, keeping plan sponsors up to date on regulatory and industry developments, and plan metrics/outcomes.

“Plan sponsors have become much more proactive because they believe the new fiduciary rule increases advisers’ responsibilities,” says Andy Schwartz, a principal with Bleakley Financial Group in Fairfield, New Jersey.  Scott Austin, a partner with Hunton & Williams LLP in Atlanta, believes that sponsors have become more attuned to advisers’ services in light of the increased litigation of the past few years and the DOL’s fee disclosure rules in 2012. He is advising the fiduciary committees at his plan sponsor clients “to take a look at their outside advisers and investment managers to understand what their current contractual arrangement purports to be, and whether it is consistent with the new [fiduciary] rule.

“Clearly, a thorough analysis of the plan’s investment lineup on an ongoing basis is critical,” Austin continues. “Advisers must oversee and monitor all of the plan’s investments and provide periodic reports, not only on the performance of the funds but also an analysis of the underlying fee structure.”

Advisers should benchmark the performance of each investment option at least annually, Schwartz agrees. “However, that is just the first step,” he says. “No mutual fund is the best performer in every environment, so it is important that this process is both quantitative and qualitative. In other words, do not replace an investment option simply because it underperforms. You need to understand why it underperformed so that you can determine the probability of its recovery.”

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