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Uncovering Conflicts When Hiring A Retirement Plan Advisor


One of the biggest problems plan fiduciaries often encounter is identifying or uncovering conflicts of interest that may cloud the objectivity of their service providers.  These conflicts are often the result of undisclosed affiliations or compensation arrangements.  As leading ERISA attorney Fred Reish has so eloquently put it, when in doubt “follow the money.”

In May 2005, the staff of the U.S. Securities and Exchange Commission (SEC) released a report entitled  “Staff Report Concerning Examinations Of Select Pension Consultants”.  The report raised questions  regarding the independence of the advice that pension consultants offered to their clients considering that many consulting firms provided services to both retirement plan clients and to money managers.

As a result, the Department of Labor (DOL) and the SEC created an excellent resource for plan fiduciaries who want to evaluate the objectivity of the recommendations they are receiving (or will receive) from their service providers.  “Selecting And Monitoring Pension Consultants – Tips For Plan Fiduciaries” includes 10 essential questions that every advisory firm, broker or consultant should be required to answer.  This is a great tool that fiduciaries can and should use as part of a prudent due diligence process and to help protect the interests of the plan’s participants and beneficiaries.

The information in this article is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, and does not purport to be complete and is not intended as the primary basis for financial planning or investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor.

01/12/2009 Tagged , ,

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