PANC 2017: Practical Fiduciary Practices

Retirement plan committees have a host of responsibilities—most of them fiduciary. To help them fulfill their varied, and demanding, fiduciary role, advisers can turn to a number of practical strategies.

Jania Stout, practice leader and co-founder of Fiduciary Plan Advisors, and moderator of “Practical Fiduciary Practices,” Thursday, at the 2017 PLANADVISER National Conference (PANC), said her firm doesn’t build materials for committee meetings itself, but looks to providers, law groups or industry-related articles. Mostly the same message can be delivered to all clients, she said, and advisers don’t have to create their own content.

For plan sponsors lacking internal staff with investment expertise, a good foundation to build on is an investment policy statement (IPS), said Jason Trine, managing director – investment platform distribution, at Principal. “Plan sponsor clients don’t have to have [an IPS], but it is good for laying the groundwork of what the adviser and the client are going to do,” he said. “Some providers, such as Principal, have model ones plan committees can use.” Trine reiterates that the overarching theme is to have a process for accomplishing goals with clients.

Another practical practice, according to Phyllis Klein, senior director, consulting research group at CAPTRUST Financial Advisors, is training. She noted the evolution in the definition of “fiduciary.” Advisers need to instruct plan sponsor clients that they are considered fiduciaries and offer them training on what that means, she said. Training should involve program materials that are understandable and actionable.

Klein has found that committees, themselves, want to be trained—on investments, and also financial jargon as they don’t always understand the terms advisers use in quarterly meetings. She added that advisers should also train client committees on plan governance and operational requirements.

NEXT: What clients want

Stout pointed out that committees are always interested in litigation updates.

At CAPTRUST, to address that interest, two advisers who are also ERISA [Employee Retirement Income Security Act] attorneys, create communications about the latest litigations and what lawsuits and court decisions mean for plan sponsors, Klein said.

According to Stout, plan sponsors also have a need and demand for target-date fund (TDF) analysis. Her firm has implemented the Department of Labor (DOL)’s tips for TDF analysis and goes over them with each client. At every committee meeting, the sponsor must respond to a checklist, to document whether it has adhered to the tips.

Trine said Principal has built a TDF analyzer. “The first step is selection, second is implementation—will [the fund] be used as the plan’s qualified default investment alternative (QDIA)?—and the third step is monitoring,” he said. The tool creates a baseline for TDFs. If any structural changes are seen or if participant demographics have changed, the committee documents decisions and starts accruing a file where its reasoning is explained. “In a DOL audit, if the agency asks why a plan sponsor is using a particular TDF series and the sponsor doesn’t have an answer, it could cause a problem,” he said. He stressed that educating participants is important if plan sponsors use TDFs.

Stout noted that a trend is building in the use of policy statements. Investment policy statements are old news, but now retirement plan committees are adopting fee policy statements and education policy statements.

Trine agreed with the idea of clarifying what to expect upfront, but maybe not by way of policy statements. He suggested putting something in writing that addresses any pain points the sponsor has experienced that could make a policy seem warranted.

In Klein’s opinion—and she made clear it was not CAPTRUST’s opinion—she is anti too many policy statements. “Any time you have something written down, you have a huge obligation to follow it, as well as maintain it,” she said. “Even though policy statements are not technically governing documents, plan sponsors will have an expectation to follow them.” She said there are other ways to accomplish the same thing, for example a paragraph in the IPS about wanting zero-revenue-sharing investments. She added she has not been convinced that education policy statements are useful.

NEXT: Onboarding new committee members

Stout recommended that, for new committee members, advisers create a cheat sheet of plan document provisions and provide new members with past committee meeting minutes to bring them up to speed. “If committee members are questioned by regulators or litigators, they will have to know the processes,” she observed.

Further, reaching out to new members for a meeting is useful for sharing background knowledge, Trine said.

Returning to the subject of training, Klein said she is seeing repetition of training, to reinforce what is learned—not only training of a new committee member, but something annual for the whole committee. Newer committees rely heavily on technology for training. Some use BrainShark technology to personalize the education to the specific plan. “They can send out the training with a link and track who participated in it and completed the whole thing,” she said.

Training annually and using technology helps ensure new committee members hear the same thing as others members and helps them to work together, Klein said.

Besides that, providing training helps the adviser set ground rules for what the client can rely on him for, and what it can’t, she said.