When choosing a retirement plan for your company, it is important to also carefully choose an investment professional to help you make the right choices. As the company, or plan fiduciaries, it is your responsibility to select, and monitor, an investment adviser that complies with ERISA responsibilities.
It is the company fiduciaries that can be held liable if this is not done with care. So how does one wisely choose an Investment Adviser?
The investment adviser is anyone who comes into your company to review the qualified plan investments (many times a 401(k). This could be someone employed by a bank, an insurance company, or even a consulting or brokerage firm.
As you seek an investment adviser it is wise to realize that not all claim a fiduciary responsibility. One might be tempted by brand name, but many times the “big guys” do not claim a fiduciary responsibility.
You must make sure to select an investment adviser that claims a fiduciary responsibility, as defined by ERISA, so as to protect you and your company from risk.
2. Take time to review their credentials.
Make sure that the company the investment adviser represents is registered with the relevant governing body, whether that be FINRA, the SEC, insurance regulators, or banking regulators.
In addition, review the credentials of the individual. What is their experience with retirement plans? What is their degree or professional qualification? Ask where the individual receives their income- do they benefit from offering a certain plan? Do they claim fiduciary responsibility as defined by ERISA? What is the advisory firm’s structure? How does it run business? What are the checks and balances within the company?
3. Avoid Conflicts of Interest
ERISA case law requires that investment advice given by a fiduciary must be free of any conflicts of interest. This means that the relationship between the adviser and the client, or the adviser and the investment provider, must be taken into consideration. Ask the investment adviser to present in writing a statement that there are no conflicts of interest.