The forever changing regulatory environment within the financial services industry has brought about many significant changes and improvements over the years. It is evident that the industry’s ongoing evolution has been beneficial to individual investors. The governing and regulatory bodies that be were enacted to protect average retail investors. It is important for investors, both retail and institutional, to have an understanding of the scope of a fiduciary so that they can best protect and insulate themselves from fraudulent financial practice and other detrimental risks that could have adverse effects on their investments. A key area where many people tend to fall short of maintaining optimal compliance standards and practices is seen with corporate retirement plans.
A corporate retirement plan must have at least one fiduciary named in the plan documents as having control over the plan’s operation. Although many individuals are aware that corporate retirement plans are administered by the fiduciary to the plan, what many fail to realize is the fact that the financial advisor/ consultant selected to manage the plan should also be a fiduciary. Why is it so important to have a financial advisor in the fiduciary capacity manage your corporate retirement plan if there is a fiduciary responsible for selecting that advisor/ consultant in the first place?
The investment oversight provided by the financial advisor/ consultant hired to manage the retirement plan is directly linked to the workers participating in the plan as well as their beneficiaries. Although being a fiduciary is not indicative of an advisor’s ability or experience, it is a huge responsibility to administer a corporate retirement plan and hiring any old money manager is not an action in the best interests of the plan’s participants. Hiring an inexperienced, non-fiduciary advisor/ broker can result in devastating repercussions and financial loss if the advisor/ broker was not to act in the best interest of the retirement plan and its participants alike.
With responsibilities ranging from diversifying the plan’s investments to maintaining the plan at a reasonable expense, the fiduciary financial advisor/ consultant is required to carry out all duties with care, skill and prudence. Aside from the inherent ethical requirements, a corporate retirement plan involves many components and responsibilities that should be carried out only by an advisor with considerable expertise and experience with handling such plans. Some other key responsibilities of a retirement plan advisor/ consultant include assistance in the development of an investment policy statement, help in choosing a plan provider, plan design guidance, assistance with selecting the investment options that will be available to the plan’s participants, participant engagement and education and most importantly, plan monitoring and regular review.
It is important to note that not every advisor is capable of administering a qualified retirement plan (in a fiduciary capacity) and the plan fiduciary must be mindful of this fact when choosing the financial professional they think should manage the plan. It is crucial that all plan sponsors confirm that they have employed a financial advisor/ consultant who abides by the fiduciary standard as opposed to a regular financial services professional (aka broker).
Is your current corporate retirement plan advisor a fiduciary? This is a vital question that all plan sponsors must answer as they too are required to act as a fiduciary to the plan. If you are unsure whether or not you have employed an advisor whom is a fiduciary, it is crucial that you give us a call at (631) 952-4466 x12 so that we can help you answer this question and ensure that you are doing right by your company’s corporate retirement plan and its hardworking participants. To learn more on the importance of the hiring a financial advisor whom is a fiduciary to manage your corporate retirement plan, be sure to check out the latest edition of the Mitlin Minute. It is not worth assuming that your plan’s financial advisor is a fiduciary. Let Mitlin Financial help you be certain of this fact so that your financial future looks that much brighter!
Disclaimer: This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.