Last week, during our PLANADVISER National Conference, I asked a panel of four plan sponsors if their current adviser was a fiduciary—and if that status mattered to them.
It’s not the first time I’ve asked that question; in fact, I have asked it of these plan sponsor panels at each of our four such conferences to date (although the plan sponsors were, of course, different). I ask it for one simple reason: While I sense a certain unanimity of opinion on the matter in retirement plan adviser circles, plan sponsors frequently have a more nuanced view.
Sure enough, this year a plan sponsor panelist not only said that his adviser wasn’t a fiduciary, but that he wasn’t at all sure why that mattered. In fact, he wondered aloud why an adviser would want to go to jail with him if something went awry.
Now, you could tell that many of the advisers in the room were surprised, perhaps stunned, by that statement. And yet, IMHO, that plan sponsor demonstrated what I felt was a pretty insightful appreciation for the litigation shield—or lack thereof—afforded him in hiring a fiduciary. For my money, far too many plan sponsors think that when they hire a plan adviser who is a fiduciary (or a provider who touts itself as a “co-fiduciary”), they have, in fact, supplanted their own fiduciary obligations to the program. But here was a plan sponsor who understood that if something “went wrong,” even if his adviser were a fiduciary, he was still on the hook.
That said, this plan sponsor’s answer was the kind of response that should surely give pause to an industry that spends so much time and energy “angsting” over the fiduciary issue.
The truth is, hiring a fiduciary is no magic talisman against litigation for the plan sponsor—and those who think (or who are mislead into thinking) so are ill-advised, to put it kindly. So why should fiduciary status matter?
Consider for a minute, when you bought your last car, who was that salesman looking out for—even as he ostensibly went to lobby his manager on your behalf? What about that clerk that was so helpful as you considered that PC or big-screen TV purchase? How about that commission-based realtor? Did they really have your best interests in mind?
Advisers that have adopted fiduciary status routinely talk about how their fee-for-service approach insulates them from bias in making fund recommendations; note that it allows them to bring THEIR very best judgment to the fore. What is, however, IMHO, too often glossed over is that it’s not just their best judgment, even an unbiased judgment, that is the essential benefit to hiring an ERISA fiduciary. Rather, it’s that judgment applied, and applied solely, in the best interests of the plan and its participants.
And that matters most—or, IMHO, should matter most—to those who are themselves charged with making decisions that adhere to those standards
—Nevin E. Adams, JD