With the rash of lawsuits and the pending DOL rule, the topic of ERISA fiduciary training and responsibility is front and center. The financial services industry, especially advisors and their licensing organizations working on defined contribution (DC) plans, are super focused on how the recently promulgated DOL conflict of interest rule will affect their business. Fiduciary training, or lack of it is likely to to be a seminal issue. The stakes are high and the rule is prominently mentioned in most calls with Wall Street analysts. But what’s the practical take-away for plan sponsors especially for smaller companies where the person charged with running the plan wears many hats?
After over 150 TPSU programs training plan sponsors, what I have observed is that while it’s important for plan sponsors to know if their advisor is acting as a fiduciary, it’s more important to them to know that their advisor is helping them fulfill their fiduciary responsibilities. While it certainly means something if an advisor is willing to take on co-fiduciary status, the important thing to remember is how the advisor will help the plan sponsor fulfill their fiduciary duties. Fiduciary training cannot be over-looked.
So what really matters is whether the advisor is providing meaningful and ongoing fiduciary training to the people running a DC plan along with the Committee and all those deemed to be a fiduciary, or anyone involved with making decisions about the plan, and whether the advisor is, on the one hand, helping to keep the plan in compliance, and, on the other hand, helping employees to retire on time. It might be easier for an advisor to fulfill these duties acting as a fiduciary, but just the fact that they will take on co-fiduciary status is cold comfort to most plan sponsors.
In fact, some of the experts like Don Trone, who started a company that went on to provide fiduciary training to almost 20,000 investment professionals, thinks the DOL rule could actually harm plan sponsors. Because the new rule is so inclusive, almost all advisors working with a DC plan will be considered a fiduciary. So a standard that was once used to distinguish advisors will be rendered practically meaningless.
The DOL rule provides plan sponsors a great opportunity to determine if their service provider, especially their advisor, is right for their company, their plan and their employees. But just because they are willing to be a fiduciary is not as important as what services they provide to help which includes fiduciary training for the Committee and plan fiduciaries.
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