Meeting the fiduciary duties of a retirement plan is important for both advisors and clients. Fiduciaries have the obligation of serving the best interests of their clients. And a fiduciary checklist can help you meet those legal and ethical standards, manage risks and safeguard the financial well-being of your clients.
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What Is Your Role as a Fiduciary?
As a fiduciary, your primary role is to act in the best interests of those you serve, typically involving the management and oversight of financial assets or decisions on behalf of others. This duty is grounded in trust and requires a high standard of care, loyalty and honesty.
Fiduciaries are legally and ethically obligated to prioritize the needs of their clients above their own. In practical terms, this means that as a fiduciary you must avoid conflicts of interest, make informed and well-researched decisions, and monitor consistently and review the performance of investments or policies under your care.
This role often involves adhering to regulatory requirements, maintaining detailed records of all transactions and decisions, and providing transparent communication to beneficiaries.
Finally, your reputation as a fiduciary can significantly boost financial lead generation by drawing in high-net-worth clients who value trust, transparency and a strong commitment to their best interests.
Checklist: Fiduciary Duties for Retirement Plans
These duties ensure that the retirement plan operates in the best interest of its participants and adheres to the legal standards set forth by the Employee Retirement Income Security Act (ERISA). Whether you’re working for a firm or want to start a financial advisor business, here are 10 duties to keep in mind:
- Duty of loyalty. Act solely in the interest of plan participants and beneficiaries by making decisions that prioritize their needs.
- Duty of prudence. Act with the care and diligence that a prudent person familiar with such matters would use. Thoroughly research all relevant factors affecting the retirement plan.
- Duty to diversify investments. Create a balanced portfolio that spreads investments across various asset classes, industries and geographic locations to reduce exposure to significant financial risks.
- Duty to follow plan documents. Operate the retirement plan in accordance with the plan documents, adhering to specified procedures and provisions such as eligibility, contribution limits and distribution rules.
- Duty to monitor. Regularly monitor the performance of investments to ensure the best interests of the plan participants.
- Duty to avoid conflicts of interest. Avoid transactions that provide personal benefit at the expense of plan participants. This involves being transparent about any potential conflicts and taking steps to mitigate them to maintain the integrity of the fiduciary role.
- Duty to select and monitor service providers. Fiduciaries must conduct thorough due diligence to ensure that investment managers, custodians, and consultants are competent and reliable. Once selected, regular evaluations are necessary to confirm that they continue to meet performance and compliance standards..
- Duty to control and account for plan expenses. Ensure all expenses related to the management of the plan are reasonable by scrutinizing fees charged by service providers, investment managers and other parties involved. Fiduciaries must also keep detailed records of all expenses to provide transparency and accountability.
- Duty to act in accordance with governing laws and regulations. Comply with all relevant laws, regulations and guidelines by staying as up-to-date as possible on ERISA for retirement plans, as well as any other applicable federal and state regulations. Compliance ensures that the fiduciary’s actions are legally sound and protect the plan from potential legal challenges or penalties.
- Duty to educate and communicate with participants. Provide clear, accurate and timely information about the plan’s features, investments and any changes that may affect participants. Education efforts should aim to help participants make informed decisions about their contributions, investments, and retirement planning strategies.
Bottom Line
Following this fiduciary checklist can help you ensure that retirement plans for your clients operate in their best interests. This means safeguarding their financial well-being and complying with current regulations and market conditions. Building your reputation as a fiduciary could also help you draw in clients who value a strong commitment to their best interests.
Tips for Growing Your Advisory Business
- Working with an advisor marketing platform can free up some of your time so you can focus on other tasks. SmartAsset AMP can help match you with leads while giving you the tools you need to follow up. Schedule a demo to learn more about how it can potentially help you grow your business.
- Partnering with online service providers can streamline your daily workflow and reduce the amount of time you spend on day-to-day tasks. One thing to consider when choosing a partner is compliance and how the platform addresses those needs. Integration capabilities are also important – you want any additions to your tech stack to be as seamless as possible.
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