Plan Sponsors have a long list of tasks, duties and requirements (sponsor due diligence) they must take into consideration when serving as a plan fiduciary. Some of the duties of a retirement plan sponsor are known by many and some of the duties are known only to a seasoned plan fiduciary. Recent findings have surfaced concerning the sales practices for a group of Wells Fargo & Company employees which may result in all plan fiduciaries changing the way they approach plan service provider due diligence.
What is the Driver of Change?
Approximately one month ago (September 2016) the Consumer Finance Protection Agency levied a $100 million dollar fine and the U.S. Office of the Comptroller of the Currency also levied a $35 million dollar fine against the company. The firm has also been ordered to pay a combined $50 million dollars to Los Angeles City and County. Numbers reflected by these fines garner the attention of executives of firms like Wells Fargo & Company. Plan fiduciaries need to comprehend what was occurring in the case of the firm and their sales tactics – as it could shed light on what could be occurring in their qualified retirement plan.
Even though Wells Fargo Asset Management was not cited in the scandal, as reported by Julie Segal of Institutional Investor, Jonathan Grabel, Chief Investment Officer of the Public Employees Retirement System of New Mexico, points out “Headline Risk Matters.” This is something of which all plan fiduciaries need to be aware.
A prudent due-diligence process for plan sponsors should include full comprehension of how service provider employees are compensated – including specific questions on total compensation packages – since bonuses, sales contests and incentives have come into question for one of the largest financial institutions on the street.
The New DOL Rules will make it simpler for plan fiduciaries to secure such information that heretofore was difficult to impossible for a plan sponsor fiduciary to discover.
