So You Think Your Client Has Outsourced ALL Investment Fiduciary Liability?

A common misconception is that if a plan sponsor hires an ERISA 3(38) Investment Manager they have successfully outsourced 100% of their fiduciary liability related to plan investments.  If that were the case, then a plan sponsor should feel ok about hiring anyone who holds himself out to be a 3(38) fiduciary, right?  Unfortunately, this misconception can put the plan sponsor at risk. 

When a plan sponsor hires an independent fiduciary, they retain oversight responsibility to review their qualifications, including credentials, the ability to stand behind the commitments they make and the methods they will use to make appropriate decisions for your plan.  They should create records documenting the review process, and maintain them for future reference and examination.

Because plan sponsors retain the responsibility managing the outside fiduciary, they need to understand the qualifications of any candidate hired to perform this work.  Among the information needed is:

  • What are the credentials and what is the experience of the key consultants at the fiduciaries’ firm?
  • Does their liability insurance cover them as ERSIA 3(38) Investment Managers?
  • Are they certified by CEFEX or another reputable, independent organization?
  • What are their levels of liability insurance coverage?
  • Has anyone at the firm been disciplined by regulatory authorities?
  • How much experience do they possess in serving as plan-level investment fiduciaries?

Fidelis Fiduciary Management operates in a transparent way so that you have access to this, and other, pertinent information when hiring us and on an annual basis in our Investment Fiduciary Annual Review™ report.

There are many more questions to ask before you hire a fiduciary.  We recommend that you be cautious about any firm that can’t—or won’t—answer your questions.

Fidelis is your partner, not a product.

David M. Montgomery, AIF®, CRPS®

©2016 Fidelis Fiduciary Management, All Rights Reserved.

No strategy assures a profit or protect against loss.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.

For Advisors and Plan Service Providers use only – Not for use with Plan Sponsors, Participants, or the General Public. This information was developed as a general guide to educate advisors and plan service providers, but is not intended as authoritative guidance or tax or legal advice. Fidelis Fiduciary Management does not warrant and is not responsible for errors or omissions in the content of this newsletter.