With 20 years of investment management experience under his belt, Tom Grzymala is on a mission to see that “the full meaning and spirit of fiduciary responsibility” is preserved–particularly now that the Pension Protection Act states the advice must be given by a fiduciary advisor. A former RIA, Grzymala is an Accredited Investment Fiduciary Auditor and now serves as a securities litigation and arbitration expert witness through his company, Forensic Analytics in Keswick, Virginia.
Washington Bureau Chief Melanie Waddell spoke with Grzymala in early September about ensuring those advisors who proffer advice are living up to fiduciary standards.
What types of issues will be raised now that the Pension Protection Act requires that investment advice be given by a fiduciary?
The Pension Protection Act states that the advice is to be provided by a fiduciary advisor. A lot of the broker/dealers and insurance companies have their own funds [within 401(k) plan offerings]. This fiduciary advisor [standard may] affect insurance companies and broker/dealers–people who are working for a part of the take–meaning, “Buy my funds and I make more money!” Many companies charge a fee for the advice that they give to the plan, and they also get a fee because participants are buying funds from that company–so they’re getting management fees inside, which is like double dipping.
I think the fact that advice must be provided by a fiduciary advisor carries significant weight, but Treasury and the Department of Labor (DOL) cannot allow conflicts of interest to happen.
How can Treasury and DOL ensure conflicts won’t occur?