ERISA (401k and 403b) plan sponsors have a fiduciary responsibility to perform their duties as a prudent expert yet realistically, most do not have the experience or training. So most hire third-party experts like advisors, record keepers, third party administrators and money managers. Yet plan sponsors are often confused about what role their various vendors play.
One helpful analogy is healthcare. Plan sponsors, like the heads of families, are responsible for the health, or retirement plans, of their employees. The most important decision the family head can make is hiring the right doctor who plays the same role as the retirement plan advisor.
That advisor, like a doctor, after determining the health or retirement planning needs of the family then helps find the right hospital (record keeper) and affiliated out-patient clinic (TPA) and recommends the right prescriptions (investments). The RPA usually acts as a fiduciary putting the interests of their clients above their own.
The other vendors are selling and representing their own services which is why the most important decision a DC plan sponsor can make is to hire the right advisor to keep them honest.
Plans must conduct due diligence on all third-party vendors which means either a benchmark, request for information or full request for proposal. RPAs are usually tasked with overseeing and conducting unbiased due diligence on other vendors but obviously cannot do that for themselves.
Which is why plan sponsors are left scrambling to review and find a good RPA. Over 50% of plans use an advisor who dabbles in the DC market leaving plans exposed to fines and lawsuits as well as creating unnecessary work for them while neglecting the needs of employees.
More plans are waking up to this reality which is why Fidelity recently reported that 47% of plans are actively looking for a new advisor.
Which, in turn, is why The Plan Sponsor University, which has conducted 550 half-day training programs, recently launched its RPA due diligence center to help plans conducts an advisor benchmark RFP or RFI leveraging the roster of over 1,000 active C(k)P RPAs trained and monitored by affiliate TRAU. Neither TRAU or TPSU is affiliated with an provider or advisory firm
Don’t leave your employees retirement plan to the wrong advisor just as a parent would not allow an unqualified doctor to care for their family. And while you might have a good relationship with your current advisor who may be well be qualified, ERISA and the Department of Labor requires a prudent, unbiased documented due diligence process conducted by an expert.
Learn how TPSU, which is currently offering a complimentary benchmarking for the rest of 2022, can help. To learn more and get started on a confidential request, go to rpaDD. Why wait?
