Tips for Plan Fiduciaries

The ERISA demands that employee benefit plans fiduciaries; both manage and administer these plans with prudence and always in the interest of the participants and also the beneficiaries. To carry out their job as above, fiduciaries regularly rely on professionals such as pension consultants for assistance. Studies have shown that in come cases these consultants, are not fully disclosing any conflicts of interest that could affect the impartiality of the advice they offer.

The Department of Labour in conjunction with the SEC, have come up with a set of rules, to assist fiduciaries in ascertaining the impartiality of the advice provided. This is what they should ask in relation to their consultants:

1. If the consultant is registered with the SEC as an investment advisor. If he is, then he should provide all the disclosures that are needed including the ADV form part 2.
2. If he or any related company, have any relation with the money managers that they consider for their recommendation. If they do have, then they should give more details about their relation.
3. If he or his related company receives any sort of compensation, from the managers he recommends. If he does, he should provide more details such as the ratio of the payments to his total income.
4. If he has in effect a set of procedures to address conflict of interest, and whether he has any policies that prevent this compensation, from being taken into consideration while providing advice.
5. Whether he allows plans to pay for his consultation fees from the brokerage commission.
6. If he does allow the above, then how is the situation monitored, to ensure that the plan receives best implementation.
7. Whether he has any arrangements with dealers or brokers.
8. If he will acknowledge in writing his fiduciary obligation as an investment advisor to the plan, in the case that he is hired.
9. If he considers himself under the ERISA as a fiduciary, in respect to the recommendations he will provide for the plan
10. To what extent do his plan clients make use of money managers or services of brokerage, from which he is receiving fees.


Reference: http://www.401khelpcenter.com/401k/selecting_and_monitoring_pension_consultants.html