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Role of Fiduciary Advisor


Role of Fiduciary Advisor
Role of Fiduciary Advisor


Attn: Business Executives! Looking to minimize legal risk? Avoid liabilities by ensuring your Retirement Plan Committee includes a CERTIFIED PLAN FIDUCIARY ADVISOR (CPFA).


Although most businesses have formal retirement plan committees, many C-suite executives, business leaders/owners/decision-makers, and employees alike would be surprised to learn that less than half of these committees include certified fiduciaries. Learn how to utilize certified fiduciaries to minimize legal risk + keep your employees happy!


Human Resources studies have shown that most businesses/organizations (80%) report having a retirement plan committee with the necessary plan documents. This statistic paints a picture of happy employees (peace of mind regarding their retirement plans), as well as happy employers (avoid liabilities and keep employees happy), right? Unfortunately, the illusion of safety provided by this rosy picture can result in employers facing unanticipated lawsuits due to the lack of actual certified fiduciaries on their retirement plan committees.


The bad news? This liability sinkhole is largely due to many companies’ retirement plan committees including sponsors/members that think they are fiduciaries, but, in fact, are not. There is a large gap here in credentials -- certified fiduciaries, known as Certified Plan Fiduciary Advisors (CPFAs), also better known as investment advisors or investment managers, are those that have earned the actual, necessary CPFA credentials in order to accurately advise businesses on their retirement plans. Unfortunately, many businesses use employees as “fiduciaries” instead of retaining the help of certified advisors. This is a seemingly simple but grave mistake that can lead to the downfall of an organization.


Business executives/leaders, decision-makers, and HR teams are not entirely at fault for this misstep – the DOL (Department of Labor) recently widened the parameters of who is considered a certified fiduciary (aka an ERISA fiduciary) on retirement plan committees. This increase in scope has led to confusion, as anyone designated as a “plan managing member” of a retirement committee is considered a “named fiduciary”, and thus held to the standards of an actual certified fiduciary.


The good news? Although the impact of this widening in scope of a “fiduciary” in retirement plan committees can result in heavy monetary and reputational liabilities for businesses in the U.S., there is a way to avoid these liabilities so your business can focus on increasing revenue, rather than avoiding lawsuits/glitches/oversights in your business committees by following the guidelines below.

What exactly is a fiduciary?

Having a fiduciary means you, as a business executive/leader/decision maker, etc., have a person, or group of people (or a business/organization!), that is in charge of acting on behalf of a business/organization. These fiduciaries/advisors are tasked with this responsibility, legally, in order to act in the best interests of their customer, regardless of whether the interests are financial, legal, or anything else. Essentially, a fiduciary is a financial advisor for yourself and/or your business/organization. Although all companies are at risk of liability when they do not have a fiduciary advising their retirement plans, bigger companies with larger assets and a high number of employees are subject to the highest liability risks in the absence of a certified fiduciary.

What is the duty of a fiduciary?

As mentioned earlier, there are many types of fiduciaries. However, one duty in common for all fiduciaries is maintaining trust with the client (aka the business) and ensuring they act with good faith in all decisions and transactions. They are required to act in accordance with a client/organization’s retirement plan, and must use their best effort in obtaining and analyzing accurate data/information to help protect the business. They must also make prudent decisions in accordance with their information gathering + the company’s business/retirement plans. Fiduciaries are required to use the utmost care and diligence in their responsibilities to the employing business client – that is one of many core fiduciary duties required of all legally certified investment advisors.

What does having a fiduciary have to do with my business’s retirement plan? What are my liabilities as a business executive if I do not hire a “certified fiduciary”?

Although most board members, crucial stakeholders, and other key contributors (lawyers, accountants, etc) to a business have fiduciary duties to the organization, many businesses often fall victim to lawsuits due to oversights in choosing their retirement plan committee members.

The Department of Labor (DOL) has widened its guidelines on who is considered a “fiduciary” in a business’s retirement plan committees. Unfortunately, this widening of the scope of qualified “fiduciaries”, which can include anyone with “discretionary authority or [fiduciary] responsibility for [retirement] plan administration” has resulted in mishaps via employee lawsuits. Although the DOL has broadened its definition of a “named fiduciary”, this can result in liabilities and distrust amongst employees, as a “named fiduciary” is not trained or certified in the skills required of a competent fiduciary that can best serve a business and its employees’ interests. Essentially, under the recent DOL guidelines, ANYONE that is designated as a “plan manager” for a company’s retirement plan is considered a “named fiduciary”, but is also held to the legal fiduciary standards of an actual administrator of the retirement plan. As one can imagine, this oversight can be the unexpected downfall of companies fighting such lawsuits, as they cannot prove they hired verified fiduciaries with the VERIFIED skills to actually act in the best interest of the company (instead of just being associated with the company).

What benefits are there to hiring a “real” (certified) fiduciary for my company’s retirement plan committee?

Upon hiring a certified financial advisor with the proper credentials (a CPFA, aka certified plan financial advisor), business executives and decision-makers can rest easy knowing their business, employees, and legal liabilities are in good hands. CPFAs will not only have a detailed understanding of their responsibilities to the business, but can properly choose, monitor, and maintain important company investments (retirement or otherwise). They are also experts at educating employees about retirement programs, and communicating all details regarding the same. CPFAs also manage the plan overall in a manner that best benefits the business and all relevant stakeholders. Most importantly, the presence of certified fiduciaries on your company’s retirement plan committee is the first line of defense in lawsuits and against other liabilities, proving that a business leader has made all good-faith efforts in protecting their business and employees’ interests.

Looking to find a fiduciary near you? Learn more here!

My firm provides fiduciary services that are not only compliant with all fiduciary laws, but all other laws applicable to your business. Whether you need a certified plan fiduciaries advisor (CPFA) for your company’s retirement plan committee, company/group benefits, business ownership & succession planning, or family financial planning/investments – I have you covered.

I also provide a Certified Plan Fiduciary Advisor (CPFA) for all your other business needs. My offerings are compliant with the requirements and certifications needed for Section 3(21) investment advisors, Section 3(38) investment managers, Section 3(21) + Section 3(38) fiduciaries, and much more – everything you need to keep your business compliant with fiduciary and retirement plan laws.


What exactly is a CPFA Professional? The CPFA credential – developed by some of the nation's leading advisors and retirement plan experts – demonstrates an advisor's knowledge and commitment to working with retirement plans. Plan advisors who earn their CPFA demonstrate the knowledge required to act as a certified plan fiduciary advisor or help plan fiduciaries manage their roles and responsibilities.


What are the requirements? In order to obtain the CPFA mark, an applicant must pass the CPFA examination which covers four major areas: ERISA Fiduciary Roles and Responsibilities ERISA Fiduciary Oversight ERISA Plan Investment Management ERISA Plan Management Once appointed, a CPFA professional must meet continuing education requirements of a total of 10 hours completed every year in order to maintain the certification. One of every 10 hours must be on ethics/professionalism topics.


What does a CPFA Professional do? A CPFA professional is trained to develop and implement comprehensive retirement plans for each client individually. He or she has the knowledge and skills to objectively assess your current financial status, identify potential problem areas, and recommend appropriate options.


Contact me at Sam Fiduciary today to learn more and protect yourself before it's too late!


Learn more here and protect your business today!

 

If you are responsible for managing your company’s retirement plan and are concerned about your current investment options, I can help. My specialty is reviewing and adding 99% value to all of my clients’ retirement plans. Contact me today If you’re ready to get the most value from your company’s retirement plan and protect yourself from personal liability as your company’s fiduciary.


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