Legal Concerns Stop Sponsors from Offering Advice

January 9, 2002 ( - Only 22% of respondents in a survey of members of the Profit Sharing Council of America (PSCA) offer investment advice to participants in their retirement plans, holding back because of concerns over their liability.

Advice By Number

The PSCA’s 2001 Investment Advice Survey also revealed that advice was most prevalent in member companies with 1-49 employees (41.4% provided advice) and those with 1,000-5,000 employees (41.2%). It is least prevalent in member companies with 200-999 employees – where only 8.3% provided advice.

In addition:

  • among member companies employing between 50 and 1999 workers, only 15% offered advice,
  • among member companies employing over 5,000 workers, only 15.8% provided such a service.

Fiduciary Concerns

Among those who do not offer advice, 93% cite “fiduciary concern about liability for advice that results in a loss, even if the advisor is competent and there is no conflict”, as the chief reason for not doing so.

In addition:

  • “fiduciary concerns about ability to select a competent advice provider under ERISA ‘prudent man’ standard,” was identified by 91.1% of the sample,
  • “fiduciary concern about ability to monitor advice provider under ERISA ‘prudent man’ standard,” was chosen as a reason¬† by 90.2% of the sample,
  • “fiduciary concern about ensuring that the advice provider has no conflict of interest,” was checked by 83.8% of the sample
  • some 68.7% cited the cost of providing advice as a reason, and
  • a little over a third said that investment advice was unnecessary.

The findings are based on data collected from 141 member companies.