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Despite the guidelines contained within the Employee Responsibility Income Security Act (ERISA), and their very broad interpretations, there is a more pressing function that business owners must concern themselves with every day: managing their operating-business profitably. Accomplishing that important task enables the plan sponsor to provide a retirement benefit to the employee base.

The successful CEO has mastered the delicate balance between knowing what his organization needs to manage and control versus everything else. The financial adviser should be adding value by helping the CEO or retirement plan committee comprehend the distinction between the needs of a plan versus the wants of a committee member.

What Does the Plan Sponsor Need?

• A pressing need of every CEO is to manage risk. Risk both masks and manifests itself in the form of fiduciary responsibility. It is quite confusing for a plan sponsor based upon the following:
• The U.S. Supreme Court decision, LaRue v. Dewolff, in which the Court found that participants could bring suits against a retirement plan based on damages to their individual accounts.
• The recent U.S. District Court ruling, Ellis v. Rycenga Homes Inc., in which the judge found that a brokerage firm was a fiduciary under ERISA—by virtue of their providing investment advice to a defined contribution plan.
• Variation of opinions among industry professionals as to what elevates a service provider to fiduciary status.
  Inconsistent communication emanating from financial advisers, relative to “what it means to be a fiduciary.”

The plan sponsor serving as a fiduciary drops zilch to the bottom line, does nothing to improve production, and does not increase sales. Plan sponsors generally have no interest in being in the fiduciary business and, in fact, they have many reasons to want to try to avoid it. However, by virtue of ERISA, plan sponsors find themselves immersed within the fiduciary business.

Although employers might not want to discuss their fiduciary role, either out of fear or ignorance, an adviser must help them understand this obligation. Any financial adviser who intentionally avoids addressing the term fiduciary is of limited value to a CEO or retirement committee. The financial adviser needs to make the plan sponsor fully aware of the risks it faces and prudent practices for managing those risks, whether or not the adviser positions himself as a fiduciary as well.

How the Adviser Makes a Difference

Fiduciary awareness is knowledge that every plan sponsor needs. A big part of the financial adviser’s job is to educate. It always has been. Only now, instead of financial advisers educating plan participants on the virtues of diversification and asset allocation, financial advisers are in a position to add value to a relationship by educating the plan sponsor’s management team.

A financial adviser should never permit­ a competitor to deliver to his client­ the news of any “cutting edge” need. Wants, however, are a different story. Anyone can bring up a series of wants (e.g., online inquiry, self-directed brokerage accounts, or investment advice) to a financial adviser’s clients—and most likely will. However, needs first must be discussed between an incumbent financial adviser and the client.

In the morphing world of retirement plans, the strong financial adviser must be proactive in identifying and addressing retirement plan needs. He also must remain a student of this industry—positioned to discuss intelligently any wants that may ­surface. Financial advisers who succeed in the retirement plan space should never permit a part-time fiduciary (the plan sponsor) to be lulled into complacency on any needs solely because the financial adviser does not provide that service.

Steff C. Chalk is CEO of the Fiduciary Consulting Group, a fee-only fiduciary consulting practice serving corporations and nonprofits. A judge for the PLANSPONSOR Retirement ­Plan Adviser of the Year award, and a faculty member of the PLANSPONSOR Institute, he is also the ­co-author of How to Build a Successful 401(k) and Retirement Plan Advisory Business.