Tip for March 2018
Investment service providers work to accommodate business executives’ need for a smooth running retirement plan by offering several “fiduciary” services in a bundled, one-stop-shop package.
From investment advice, to mutual funds, to recordkeeping and custodial duties one or more of these services are often offered under a vendor’s common ownership, which creates conflicts of interest.
The vendor’s enticing claims made to executive teams regarding the benefits of their so-called “bundled approach” include:
- gain cost efficiencies;
- only one vendor to supervise and coordinate all of the fiduciary supply chain activities; and
- enables one service provider to be intimately acquainted with the intricacies of the company’s retirement plan.
First, while there are no laws prohibiting retirement plan executives from hiring vendors who provide multiple services, there are laws that require executives to evaluate these vendors’ conflicts of interest.
Corporate fiduciaries who avoid even a superficial review of vendors’ conflicts of interest subject themselves and their personal assets to great risk under federal pension law.
Additionally, a careful review of vendors’ conflicts of interest might reveal astonishing overpricing for services that have been hidden by the mirage of “efficiencies” the vendor represented to exist.
Tip:
Sorting out the veil of conflicts requires specialized knowledge that’s not often found among typical retirement plan managers.
Find out where your 401(k) or 403(b) plan’s conflicts of interest lurk.
A comprehensive risk assessment is the solution.
Contact us for guidance on how an assessment can create calm assurance for your fiduciary role.
