Leave the Comedy to the Comedians
The classic Abbott and Costello comedy skit, Who’s On First?, used a play on words to tie Sebastian Dinwiddie (Costello), a popcorn vendor, into a linguistic knot as he attempted to learn the names of the players on a baseball team from the manager, Dexter Broadhurst (Abbott). The peculiar names of the players—Who, What, I don’t know—result in a back-and-forth conversation full of confusion, perplexity, and, by the end of the skit, notable irritation.
Sound somewhat familiar?
As a service provider to retirement plans, whether as a plan advisor, third-party administrator, or recordkeeper, you’ve
undoubtedly unfortunately experienced a similar discussion when talking about fiduciary roles with a plan sponsor. The complicated industry speak combined with widespread misinformation about who is and what it means to be a plan fiduciary begets a lack of understanding and puzzlement. The potential for things to go wrong from there are consequential and significant.
For this reason, fiduciary duties must be clearly divided (“allocated”) and/or delegated in writing and fully understood by the plan sponsor and retirement plan committee, as applicable. Following are four themes that should be addressed accordingly:
- Who is and who is not a fiduciary?
- What are the exact duties of each fiduciary and non-fiduciary, and are those duties plainly described in writing?
- How do the various vendor relationships operate in a qualified plan, and how does that affect fiduciary decisions and actions?
- What is the difference between an advisor, a consultant, or an investment salesperson and how does that difference affect fiduciary decisions and actions?
As parts of the industry disappointingly appear to be regressing (secret pay-to-play payments, recordkeepers compensating their wholesalers for pushing proprietary investments undisclosed to the plan sponsor—just to name two examples), it is as important as ever for industry practitioners to help plan sponsors thoroughly understand how fiduciary responsibilities are assigned and fulfilled.
In short, it’s probably a best practice to avoid having a fiduciary responsibility conversation turn into a comedy act.
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