More On Legal & Compliancefrom The Advisor's Professional Library
- Regulatory Oversight of Investment Advisors Although the regulatory environment is in a state of flux, it is imperative that RIAs adhere to their compliance obligations. To ensure compliance, RIAs and IARs must fully understand what those obligations are.
- Do’s and Don’ts of Advisory Contracts In preparation for a compliance exam, securities regulators typically will ask to see copies of an RIAs advisory agreements. An RIA must be able to produce requested contracts and the contracts must comply with applicable SEC or state rules.
Security Benefit and Mesirow Financial Investment Management Inc. recently joined forces to help employers offer a retirement plan for their employees, and to assume the fiduciary role of selecting investments for participants.
The program–the Fiduciary Partnership Service–is designed to help plan fiduciaries of participant-directed 401(k) and 403(b) plans with satisfying their obligations under the Employee Retirement Income Security Act and similar state law related to the selection of investments.
Through the service, Mesirow Financial says it “assumes plan level fiduciary responsibility for the selection, monitoring and, if necessary, replacing the investment options offered to the participants and developing a well-diversified investment lineup.”
“Employers are under increasing pressure to offer a well-designed, well-managed retirement plan–typically participant-directed–for their employees. Many factors go into creating this pressure, not the least of which is the roller-coaster ride the financial markets have experienced since 2008,” Security Benefit explains in a white paper about the new program.
Because the selection of plan investments is a fiduciary decision and must be made “prudently,” employers that lack the expertise or are concerned about liability often turn to their financial advisors for help in making those choices, placing the advisor in a role it may be reluctant or unable to assume, the white paper says.
But, by using the Fiduciary Partnership Service, the white paper says, employers can limit their responsibilities as plan fiduciaries and “relieve the financial advisor of the pressure to provide services to its clients that step over the fiduciary line.”
Under the fiduciary service, Mesirow Financial assumes discretion for the selection and monitoring of a plan’s investment options, and acknowledges that it is a fiduciary to the plan.
Guidance issued by the Department of Labor under ERISA says that if advisors recommend the investment line-up for the plan, they could be considered to have given investment advice to the plan fiduciaries, “which would mean that they have become a fiduciary to the plan,” the white paper states. “In that case, the financial advisor would be
In serving their plan sponsor clients, the white paper says that advisors “may feel they have little choice but to give the advice the client is requesting if they want to preserve the client relationship.”
This is where the Security Benefit Fiduciary Partnership Service comes into play to help the advisor. “It does so by eliminating the need for the advisor to give advice to the plan sponsor on selecting the plan investment lineup because this service is being provided by Mesirow Financial.”
However, this doesn’t diminish the advisor’s role, the white paper says. “There is still a significant role that the advisor can and should play, services that the advisor can and should provide, that neither Security Benefit nor Mesirow Financial is in a position to provide.”