Surveys Highlight Importance of Fiduciary Focus When Hiring Advisors

According to an August 17 press release from Fidelity Investments, "fiduciary responsibility tops plan sponsors' reasons for hiring advisors." What's more, this poll of nearly 1,000 defined contribution plan decision-makers makes clear that knowledgeable third parties have an edge in being hired and retained, especially if they can offer input about plan design and investment selection. Cited areas of concern include the following:

  • Increasing employee participation;
  • Properly measuring investment performance; and
  • Making sure that investment risk goals are heeded.

A 2016 Mass Mutual survey reveals similar findings that plan sponsors want help with plan design, discharging fiduciary duties and investment selection. Moreover, about two-thirds of respondents said they want an advisor who works with companies like theirs. 

It's no surprise then that educational initiatives continue to develop in response to changing regulations and an enhanced focus on fiduciary duties. As announced last month, the American Retirement Association has partnered with Morningstar "to develop a fiduciary education and best practices program for advisors."

April 2017 will be a busy month for many as they seek to comply with large chunks of the U.S. Department of Labor Fiduciary Rule.

Investment Management and Stress

The fact that some people thrive on stress could be a plus if you want to work in the financial services industry. According to "The most (and least) stressful jobs in banking and finance" (, December 31, 2015), careers that were ranked as most stressful to least stressful are as follows:

  • Investment banker;
  • Trader;
  • Risk management and compliance;
  • Wealth management/private banker;
  • Institutional sales;
  • Management consulting;
  • Private equity;
  • Equity research;
  • Fund manager; and
  • Accounting.

Interviews with recruiters and employees mentioned long hours and a lack of control over issues that create problems and demand solutions. Respondents who work in the risk management and compliance areas talked about their frustration when they call out areas in need of improvement but then "nothing is done." 

Other professionals, such as those who work in wealth management, talked about competition as being a source of stress. Making money only occurs after an advisor expends considerable effort to build a big client base but then more time is needed to prevent an aggressive peer from taking assets away.

Besides job-specific concerns, industry changes can be a source of worry if they are expected to radically transform the way business is conducted. Consider the rise of financial technology ("FinTech") or what Inc. Magazine referred to as "One of the Most Promising Industries of 2015." According to a recent Wall Street Journal article entitled "Can Robo Advisers Replace Human Financial Advisors?", assets managed without human intervention grew from $3.7 billion to $8 billion between July 2014 and July 2015. Although critics counter that robots cannot offer individualized advice about specialties such as estate planning, a reliance on automation, if substantial, will result in winners and losers.

Regulatory changes can raise stress levels too, especially if one has little latitude to adapt to a new rule at the individual level. The U.S. Department of Labor's proposed fiduciary rule is already showing up in the form of strategic corporate decisions that are moving people from one place to another. This week's announcement about a sale of MetLife's U.S. advisor unit to the Massachusetts Mutual Life Insurance Co. comes on the heels of the American International Group's decision to sell its broker-dealer unit rather than potentially incur added compliance costs. See "MetLife exits brokerage business as DOL rule looms" (Investment News, February 29, 2016).

Although not specifically mentioned in articles about stressful jobs, ERISA retirement plan fiduciaries are surely aware of their personal and professional liability exposure. Add the complexities of new legislation and economic challenges such as negative interest rates and it's not a stretch to understand why some fiduciaries might need to take a few deep breaths to relax. No doubt their public pension colleagues may need a zen moment as well.

ERISA Litigation and Enforcement: Role of Independent Fiduciary and Financial Advisor Best Practices

Mark your calendars to attend an educational webinar entitled "ERISA Litigation and Enforcement: The Role of the Independent Fiduciary and Best Practices for Financial Advisors." Sponsored by fi360 and eligible for continuing education credit, this April 8, 2015 event will take place between 3:00 pm and 4:00 pm EST and address important and timely issues for plan sponsors and their advisors. Details are provided below.

Description: ERISA litigation and enforcement increasingly involves allegations of conflicts of interest and imprudent decision-making on the part of advisors, consultants, banks and asset managers. In several recent matters, regulators and judges have made it clear that the use of an independent fiduciary would be interpreted as a reflection of procedural prudence and the absence of an independent fiduciary could hasten a decision of fiduciary breach.

Learning objectives:

  • Learn about relevant cases and regulatory actions that involve third parties such as financial advisors;
  • Hear a discussion about how advisors, consultants, banks and asset managers can work effectively to demonstrate procedural prudence; and
  • Better understand what state trust law and ERISA oversight activity means for advisors and consultants who work with non-ERISA trusts.


  • Thomas Clark, Esquire (Counsel - The Wagner Law Group)
  • Susan Mangiero, PhD, AIFA, CFA, FRM, PPC (Managing Director - Fiduciary Leadership, LLC)
  • Mitchell Shames, Esquire (Partner - Harrison Fiduciary Group) 

Please join as your schedule permits. Click here to register.

Pension Transparency In A Digital World

Intrigued after reading "Colorado turns to Twitter to recruit pension board members" by Meaghan Kilroy (Pensions & Investments, February 23, 2015), I spent some time exploring the various social media sites for the Colorado Public Employees' Retirement Association ("PERA"). Recruiting Tweets can be found by clicking here. There is also a video at about "Serving as a PERA Trustee" for the $44 billion system that covers 500,000 individuals. Viewers learn about guardian-type investment oversight duties that include loyalty, prudence and care. A more traditional information sheet entitled "Serving As A PERA Trustee: Factors to Consider" describes what trustees do, their fiduciary responsibilities, the composition of the PERA board, educational requirements and typical time commitment.

Elsewhere, whether part of its blog, Twitter site, You Tube channel or main website, there are numerous pronouncements about financial performance, new investment offerings, videos about retirement planning, calculators and Town Hall meetings.

One Twitter post that particularly caught my eye linked to a February 20, 2015 news item entitled "Colorado PERA: Best Practices Leader." Besides letting readers know that the Board of Trustees had hired Milliman, Inc. to conduct a review of PERA's actuary, a hyperlink maps to the May 2014 recommendation of the Government Finance Officers Association ("GFOA") that pension plan fiduciaries "exercise prudence" in selecting and monitoring service providers such as actuaries. The cherry on top of the cake, in terms of transparency and easy access to information, comes in the form of an embedded link to the Milliman audit report as well as to the response from PERA's actuary, Cavanaugh Macdonald Consulting, LLC.

Having spent considerable time in reviewing the use of social media by retirement industry service providers and plan sponsors for several clients, I was happy to learn about the Centennial State's commitment to knowledge-sharing. While I cannot attest to the details of PERA's structure, its investment program and other elements of governance by examining internet properties alone, it does appear that this public plan sponsor is focused on regularly communicating with its participants, retirees and vendors.

Given a plethora of negative headlines about pension plans (public and corporate), shedding light on critical issues by any sponsor will likely be seen as a smart thing to do. This assumes that information provided to various constituencies is clear, accurate and helpful. A talented digital media professional can play a vital role by ensuring that a steady flow of content gets disseminated. Beyond that, he or she needs to engage with the intended target audience(s), solicit their feedback on an ongoing basis and make recommendations to a plan sponsor (or service provider) as a result. Compliance or confidentiality restrictions have to be taken into account. Avoiding complexity is another challenge that competes with the need to avoid being "too cute" and thereby coming across as trivial.  The list of "must do" tasks is long when an organization decides to craft a communications strategy that relies on new technology. Quantity is the not the same as quality and the use of social media can be counterproductive if not adopted with care.

Plan sponsors and financial service providers may have no choice but to join cyberspace colleagues as the use of services such as Twitter, LinkedIn and Facebook continue to gain popularity. See "Social Media Used By 71% Of Retirement Plan Participants, Survey Says" (Financial Advisor, September 26, 2013).

$89 For An Umbrella and No Money To Retire

In between business meetings in Greenwich, Connecticut the other day, it started to rain heavily so this blogger walked a few blocks to an upscale department store (the closest in sight), in search of a reasonably priced umbrella. Since I have so many umbrellas already (but had forgotten to pack one), I figured I would spend a modest $15 or $20 to buy another umbrella to keep me dry. How much could an umbrella cost after all? To my surprise and shock, none of the umbrellas came in at less than $89 (plus tax of course). For some people, that's a tiny price for protection. Certainly this merchant was thriving with designer attire, shoes and jewelry finding its way into shoppers' bags.

However, the reality is that not everyone is going to shell out 89 big ones for an umbrella, no matter what the brand. For a large segment of the U.S. population, money is a scarce resource and confidence in a secure future is low. According to the results of a recent Wells Fargo/Gallup Investor study, optimism is down and pessimism is up. At the same time that 68% of respondents say they have "little to no" confidence in the stock market as a way to prepare for retirement, 80% of investors urge lawmakers to act now so that savings is encouraged.

Unfortunately, most of the initiatives that individuals cite as "must have" elements of a national retirement readiness program are in direct conflict with the political grab to raise taxes. Consider a few examples.

  • Sixty-nine percent of the survey respondents say it is "extremely" or "very important" that politicians encourage every company to offer a 401(k) plan to its employees. Since there is already talk in Washington, DC about stripping companies of the tax benefits associated with offering retirement plans, it is unlikely that employers will realize further tax advantages at the expense of big spenders having to lose tax "revenue."
  • Sixty-six percent cite the need for the government to figure out how Americans who participate in 401(k) plans can get "more quality investment advice." Anticipating increased regulations as relates to investment fiduciary duties, some financial advisors are becoming less generous with information for fear of being sued. As described in "401(k) Lawsuits, Investment Advisers and Fiduciary Breach" (November 18, 2012), breach of fiduciary duty is cited as the top complaint in FINRA arbitration matters.
  • Sixty-nine percent want the government to establish initiatives that will motivate individuals to participate in their employer's 401(k) retirement savings option, assuming that they work for a company that offers benefits. Yet here we are, talking about a fiscal cliff that could impact millions of people with incomes below the magical "rich" benchmark of $250,000.  For one thing, in the absence of inflation indexing, the Alternative Minimum Tax that was enacted decades ago will show up as a nasty spring 2013 surprise for countless tax-paying middle-class households. Then there is the issue of jobs not created because employers will be writing larger checks to the IRS instead as various tax rates go up.

The United States is not alone in having to tackle difficult problems. The list is long and includes (but is not limited to) insufficient aggregate savings, underfunded social programs that are not sustainable safety nets without reform, high unemployment, corporate jitters about parting with cash, uncertain tax and regulatory environment and conflicting interests that make it almost possible to come up with near-term solutions.

There is a way forward to expand economic growth but that will require political courage. Let's hold our policy-makers accountable in 2013.