Chances are the term “fiduciary” rings a bell but bears little real meaning. If so, you’re not alone. The Center for Fiduciary Studies estimates that, although many are wholly unaware of their legal responsibilities, more than 5 million people serve in a fiduciary role and account for the management of more than 80% of the investable assets in the United States.

If you ask a professional to define “fiduciary,” they will likely tell you there is no clear-cut industry standard.

The Center for Fiduciary Studies defines a fiduciary as anyone who has the legal responsibility for managing property for the benefit of another, exercises discretionary authority or control over assets, and acts in a professional capacity of trust rendering comprehensive and continuous investment advice.

Whenever a company offers a 401(k) or a non-profit offers a 403(b) plan, they have a fiduciary responsibility to provide a quality low-cost retirement plan as well as a responsibility to perform periodic reviews to ensure that the plan is the best it can be for participants. Failure to perform high quality or periodic reviews is a litigable fiduciary breach.

On Tuesday, July 10, 2018, David John Marotta appeared on Radio 1070 WINA’s Schilling Show to discuss the responsibility of retirement plan sponsors and describe our Retirement Plan Management service.

Listen to the audio here:

We believe that every business should start a 401(k) and every non-profit should offer a 403(b). The potential tax savings for employees is tremendous. But every business owner or director of a non-profit should realize that if they don’t take their fiduciary responsibility seriously, they are legally liable for their neglect and inaction. For example, Ameriprise was sued by its employees over excessive 401(k) fees, and they had to pay $27.5 million to settle.

The highest form of fiduciary support comes from advisers that accept 3(38) status. A 3(38) investment manager supports the plan by choosing all of its investment options. Typically, a 3(38) adviser also creates the models or fund of funds being used to make diversification easy for plan participants.

Our firm decided to become a 3(38) investment manager because playing this role offers our clients administrative relief. By taking on the role of a 3(38) adviser, we accept responsibility for selecting a prudent investment strategy. Advisers who do not name themselves 3(38) investment managers must seek the approval of an organizational investment committee every time an investment allocation needs to be adjusted or replaced. Thus, it’s nearly impossible to maintain a fiduciary relationship and a dynamic investment approach without hiring a 3(38) investment manager.

The retirement plans we offer have always included low cost mutual funds as well as model portfolios using those low cost mutual funds. Each of these model portfolios are designed with a specific mix of stocks and bonds. The portfolios range from 100% stocks for younger clients to portfolios which gradually add bonds into the mix for participants who are about to take withdrawals in retirement. We believe that these funds and the portfolios built from them have lower costs than the typical fee-laden retirement plan offerings from many other financial companies. As a result of the lower costs, we think they will also have a better return.

In 2017, we also added an age-appropriate unitized trust option for our retirement plans as the latest enhancement. In addition to other valuable benefits, our unitized trusts allow us to implement our dynamic tilt based on forward P/E ratios, which studies have suggested generate a higher expected mean return.

We first designed our “dream” retirement plan when a client who was a small business owner asked us to review the 401(k) plan proposals that he was being offered. They were all terrible and laden with fees. Upon further analysis, we concluded that most retirement plan proposals were similarly terrible and laden with fees. So we designed our own.

Now, we offer retirement plans not just to our client business owners but to any organization that wants professional management from a fee-only fiduciary like us. If your organization would like a proposal either for a new plan or to replace your existing one, please just give us a call. You and your plan participants deserve a fiduciary standard of care for your retirement plan assets.