Plan Governance Stands Tall Among Adviser Services

The 2024 PLANADVISER Adviser Value Survey is a reminder that rigorous plan governance and fiduciary guidance is a benefit of working with retirement plan experts.

The 2024 PLANADVISER Adviser Value Survey analyzes the survey results of more than 2,100 plan sponsors from sister publication PLANSPONSOR’s Defined Contribution Plan Benchmarking Survey to get a read on where the presence of an adviser seems to have the most influence on plan outcomes.

By comparing metrics from plans that work with an adviser to those that do not, the survey finds plans with advisers are more likely to use automatic escalation, have higher default deferral rates and stronger chances of a company match.

But where adviser presence really makes a difference is this year was in plan governance and fiduciary training, to ensure clients are meeting regulatory needs and staying protected from audit and litigation risks.

So how can an advisory ensure it is keeping up with the market on governance and fiduciary needs? As some of PLANADVISER’s top advisers discuss below, plan governance and training go well beyond the three Fs of funds, fees and fiduciary. Standing out for regulatory guidance and committee training requires dedication and personalization for each client an adviser serves.

Governance Framework

Plans benefit from having an adviser to encourage the plan sponsor to establish good governance and risk management policies that can last throughout the year and adjust to both internal and external changes, says Chad Goerner, a senior vice president, corporate retirement director and senior institutional consultant with RBC Wealth Management.

“A strong governance framework can contribute directly to committee member engagement, education and risk management,” Goerner says. “We believe that it ultimately leads to better, more informed decisionmaking on plan design, investment appropriateness and can contribute directly to risk mitigation.”

At RBC, advisers create a governance framework that includes committee bylaws, regular fiduciary education and a “clear” investment policy, Goerner notes.

The firm also provides ongoing regular plan guidance for its clients. That includes a “deep-dive analysis” into the plan’s qualified default investment alternative, annual fee benchmarking for both administration and investment expenses and new plan trends and best practices.

“This is an important area of governance, as new legislation [the SECURE 2.0 Act of 2022] can potentially bring new opportunities and considerations for plan sponsors,” he says.

The team also considers potential plan risks, including any changes to retirement plan law and legislation, and then documents how the committee is addressing those risks.

Four Ps

Governance goes well beyond the three Fs for which plan advisers used to be known, says Jean Duffy, a senior vice president and retirement consultant with CAPTRUST. Her teams look at the “four Ps”: prudence, process, protection and participant outcomes.

“We make sure that we are taking time in our meetings to focus on those items and help our plan sponsors think about that broader meaning of being a fiduciary,” Duffy says.

In addition to the regular meetings, Duffy “carves out time” for one meeting every year to remind the committee about the role of a fiduciary and train committee members on the duties, as outlined by the Employee Retirement Income Security Act. The firm also provides training immediately to any new members, providing a training video and documents and then conducting a call to discuss and answer any questions.

Duffy says her practice, even before joining CAPTRUST, had been focused on doing “holistic retirement plan” consulting that went beyond just basic investment guidance. Twenty years ago, that approach stood out from many advisories. But today, she says, the holistic approach is much more common, so the quality and care of services become differentiating factors.

“There are a lot more specialists who have joined the ranks,” she says. “You’ve got to figure out ways to elevate and bring your practice to the next level.”

Having an investment policy statement is an important part of what advisers can provide, says Jania Stout, a senior vice president at OneDigital Financial Services, via email. But when it comes to standing out, it can also help for advisers to create a “well-crafted” plan charter, she says.

“In our work, we collaborate closely with plan sponsors and often involve their outside counsel to ensure that key governance measures, such as the charter, are properly established and implemented,” she says. “This is especially important for nonprofits, where having a strong governance framework helps protect board members from potential liabilities.”

Fiduciary ‘Breadcrumb Trail’

Implementing fiduciary governance for a plan sponsor is not the only important step for clients, notes Craig Stanley, a financial adviser and lead partner for retirement plan consulting in Summit Group, an Alera Group company. He says documenting that governance is also crucial.

“As the saying goes, ‘If it isn’t documented, it didn’t happen,’” he says. “We not only assist our clients in executing these governance responsibilities, but we also ensure every step is carefully documented. This process creates what we call a ‘fiduciary breadcrumb trail,’ capturing all key actions and decisions.”

Stanley says the firm stores plan records in a fiduciary vault that is accessible to clients.

“Whether it’s for internal review, routine audits or onboarding new executives, this system ensures they have a clear, detailed record of the plan’s governance history,” he says.

Goerner of RBC notes that a strong governance structure does not just reap benefits for plan outcomes and regulatory diligence; it can also have positive knock-on effects for the plan sponsor team.

“When you have a clear committee structure and clear terms for members of the committee, you end up usually having a much more engaged committee who ends up making better decisions,” he says. “[Committee members] have a lot of other priorities. Unless something is broken, it may not rise to the top; as an adviser, you want to prevent anything deteriorating in terms of governance.”

—Alex Ortolani