Under ERISA §405, a named fiduciary (such as the retirement plan committee) may delegate fiduciary responsibilities to a qualified investment advisor — but finding the right fiduciary can be challenging. When researching investment advisors, how can you tell the difference between genuine integrity, reliability and insight — and just effective sales and marketing?
In short, how do you know which professional relationships are worth building?
When assessing relationships in our personal lives, we use trial and error — and a combination of visual, auditory and olfactory cues — to form and refine opinions. Combining these instinct-driven cues, we determine whether people are approachable, dependable and trustworthy.
Though this imprecise method may work to guide our personal relationships, organizations have to rely on clearer criteria when the consequences of being wrong can make trial and error an unacceptable process.
While instinct and personal connections may play a role in business, diligent, documented processes should be the foundation for any professional relationship — especially for retirement plan sponsors who must protect plan participants while also being held personally responsible for their choices as a fiduciary.
To effectively delegate any fiduciary responsibilities, the named fiduciary must:
- Investigate the expert's qualifications;
- Provide the expert with complete and accurate information; and
- Make certain that reliance on the expert's advice is reasonably justified under the circumstances.
Unlike legal, medical and accountancy professions, however, the investment advisory industry requires no defined criteria or specific educational requirements.
If you are a plan sponsor, before you entrust your employees’ retirement money, Presidium recommends a five-step process for evaluating service providers:
- Establish a prudent process;
- Develop criteria for evaluation;
- Review the findings and make the selection;
- Document the process; and
- Monitor the selected provider.
Selecting the right investment advisor may be challenging, but the right process can help simplify and streamline your choices. To learn more about each step — and find out about Presidium's independent fiduciary services —contact Anne Comer at acomer@presidiumadvisers.com or at (704) 907-4272.
