Invesmart Publishes Fiduciary Standards Scale

The scale is divided into three levels – orange, yellow and green – depending on different levels of participant advocacy.   Providers at the orange standard represent the lowest participant advocacy standard, with providers at the green level having particularly high participant advocacy marks.   The scale is being offered to plan sponsors as a means of rating their providers and their retirement plans, according to a news release.

Providers at level orange facilitate meeting the 404(c) requirements and provide participants with some educational support at enrollment meetings and on Web sites. However, that is where the assistance ends.   Plans tend to rely on proprietary funds, follow a passive investment policy statement, and make little effort to fully explain fees involved. At this level employees generally do not save and invest properly for retirement.

Yellow level providers select and monitor investments in the plan following a qualitative and quantitative methodology based primarily on historical performance criteria. Fees are known to plan fiduciaries but not always disclosed to participants. Participants have access to automated planning tools and the ability to speak to a live person when they have questions.   However, employees generally regard these features as an “add-on” outside the normal plan experience and are not fully utilized.

Providers at the green level have independent professional advice available throughout the participant experience. The professional is positioned clearly as a co-fiduciary providing investment advice to the plan sponsor and the participant. The plan deploys an institutional quality investment process and discloses all fees including internal investment expenses and revenue sharing offsets to participants. Participants in green-standard plans have the best chances of understanding and meeting their retirement needs.