Fiduciary Education Considerations

Rumor has it that regulatory exams of retirement plans continue to include explicit questions about whether a formal education program exists and, if it does, what it contains. Certainly the topic is not new. In 2002, the Working Group on Fiduciary Education and Training made recommendations to the U.S. Department of Labor to include the following:

  • Ensure that everyone understands that a fiduciary must "perform competently" which means, by extension, that he or she must be educated about duties and responsibilities;
  • Appoint someone to lead fiduciary education and outreach on a national basis;
  • Expand guidance as to what constitutes "best practices," adding to guidelines such as "A Look at 401(k) Fees for Employers";
  • Recognize that fiduciaries of smaller plans will likely have different training needs than those of larger plan fiduciaries; and
  • Provide helpful tools such as a dedicated hotline, a primer about fiduciary duties and conferences. 

A visit to the U.S. Department of Labor website entitled "Getting it Right - Know Your Fiduciary Responsibilities" yields a treasure trove of educational publications and hyper links to various online tools such as The ERISA Fiduciary Advisor. In addition, there are countless organizations that provide extensive fiduciary programs, some of which lead to certifications should one pass exams and meet experiential mandates. I myself have both taken and led various workshops about investment fiduciary subjects and continue to satisfy the requirements to be an Accredited Investment Fiduciary Analyst.

Yet with the plethora of available information about what it takes to carry out one's fiduciary duties, allegations of breach continue and on a grand scale. During a recent program entitled "ERISA Litigation and Enforcement: The Role of the Independent Fiduciary and Best Practices for Financial Advisors," my co-presenters and I talked about the importance of education and the consequences of not being up to speed on what has to be done on behalf of participants.

Some have suggested that formalizing a training requirement makes sense, adding that guidelines can demonstrate good faith and thereby serve as a defense in the event that a lawsuit is filed against investment fiduciaries down the road. Others counter that too much specificity may not allow for changes in circumstances or be inadequate to the multiple tasks of selecting advisors for more than one specialized asset class or strategy. 

Based on my experience, documentation about how internal fiduciaries are selected, let alone developed, is something of a rare bird. Likewise uncommon is a written policy that explains how investment committee members should be evaluated in terms of performance and by whom. In contrast, nearly all jobs have a specified description, an established pay scale and clear criteria about what makes for a "good" job versus performance that is deemed "unacceptable." Though one might be tempted to conclude that the absence of a formal procurement protocol for a retirement plan fiduciary means that the role is unimportant, nothing could be further from the truth. Serving as a fiduciary is a real job in every sense of the word and should be acknowledged accordingly.

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