The Weight of Fiduciary Responsibility for Helping Retirement Plans Provide the Best Financial Outcomes for their Participants

In today’s increasingly litigious and tightly regulated retirement plan landscape, there are few roles in financial services under as much scrutiny as that of a fiduciary retirement plan advisor.  Advisors must rigorously comply with fiduciary standards that courts describe as the “highest under the law” – and are well served to clearly document their fiduciary processes.

As the industry continues to evolve, three critical challenges are shaping the future of retirement plan advising.

Key Challenges Facing Retirement Plan Advisors

1. Rigorous Fiduciary Standards
   The Employee Retirement Income Security Act of 1974 (ERISA) statute, as interpreted by the Supreme Court, requires that all fiduciary investment recommendations and decisions be made for the sole purpose of maximizing risk adjusted financial returns. Plan advisors should implement a rigorous process to ensure that all investment recommendations and decisions meet this standard. While this standard cannot be changed by executive or agency action, plan advisors should be well-versed in the latest regulatory developments and litigation trends. Increasingly, clients view receiving updates in these areas as a non-negotiable part of the advisor’s role.
2. Increased Litigation Risks
   ERISA litigation challenging fiduciary decisions for 401(k) and other defined contribution plans have exploded over the last 15 years, which bring into focus the importance of rigorous compliance with the ERISA fiduciary standards. But litigation risk doesn’t change the standard governing advisor recommendations or decisions. Plan investment recommendations or decisions should be made for the sole purpose of maximizing risk adjusted returns, regardless of litigation scrutiny.       The best ways to mitigate litigation risk is to scrupulously follow this ERISA investment standard and document a robust process used to arrive at plan investment decisions.
3. Time-Consuming Documentation
   Documenting a fiduciary process can be time consuming – but also essential given the scrutiny plan fiduciaries face. A key form of documentation can come from minutes of fiduciary investment committee meetings. Minutes may provide the clearest illustration of a robust process to reach fiduciary decisions, including ones related to investment selection methodologies, fee benchmarking, ongoing monitoring, and potential investment replacements. The importance of documentation in a modern retirement plan, and the burdens in creating it, underscore the benefits of tools and processes that streamline documentation efforts without sacrificing quality.

How Advisors Can Adapt and Stay Compliant

How can advisors stay ahead of the curve and keep providing their clients with outstanding value in light of the substantial obligations of retirement plan advising? Adopting effective compliance procedures, embracing technology, and proactively informing clients of their fiduciary duties are all essential to success.

Leverage Technology for Document Management

It is becoming increasingly important to invest in a centralized, secure document management solution to document robust fiduciary processes used to make investment recommendations or decisions that satisfy ERISA and other legal requirements. Advisors may manage, preserve, and arrange important fiduciary documents with the help of solutions like RPAG's Fiduciary Briefcase. This tool can enhance fiduciary processes, and, if responding to audits, legal threats, or regulatory reviews, it can help quickly access and submit responsive records. In addition to increasing productivity, centralized document storage gives employer plan fiduciary clients more assurance by showcasing a dedication to transparency and readiness.

Educate Employer Plan Fiduciary Clients on Their Responsibilities

Most employer plan fiduciaries require training to understand the extent of their fiduciary duties – training that, in of itself, can be evidence of a robust fiduciary process. Advisors have a powerful opportunity to add value by offering ongoing fiduciary education and training to their employer plan fiduciary clients. When employer plan fiduciaries understand their obligations and how to meet them, they are more likely to appreciate the advisor’s expertise and partnership. More importantly, an educated employer plan fiduciary is a critical ally in maintaining a culture of fiduciary excellence.

Building a Future-Proof Advisory Practice

The role of a retirement plan advisor is both complex – and critical for helping secure the financial retirement security of plan participants and beneficiaries. Doing so demands a disciplined, proactive approach. Advisors who embrace technology, prioritize documentation, automate compliance workflows, and invest in client education can have a leg up in having the tools to be best positioned to thrive.

With RPAG’s Fiduciary Briefcase, technology to analyze potential plan investment options, and ongoing fiduciary education, advisors can build a sustainable, high-performing practice rooted in trust, transparency, and superior service. In an environment where intense scrutiny is the only constant, staying ahead is the best path to success.

This material is provided for general and educational purposes only.  It is not intended to provide legal, tax, fiduciary or investment advice.  It does not address your specific circumstances and may not be relied upon.  Neither access to this material nor the contents of this material create a professional or fiduciary relationship between you and any of Great Gray Group, LLC, RPAG, Great Gray Trust Company, LLC, their affiliates or any of their representatives or employees.  For legal, tax, fiduciary, or investment advice, please consult your own consultant, advisor, or lawyer, as appropriate.

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