Have you had a situation where you
were advising a committee about an
issue or taking a certain course of
actions and they completely ignored
your advice? W/O mentioning names
can you walk the reader through it?
I would say for our retainer clients, the
answer would be no. I mean there is
reason why they’ve hired us—they get
their responsibilities, they understand
the liability and the breadth of what’s
expected of them. But for some of our
project clients, we have seen where
we’ve made a recommendation and
they either have kind of pushed that
recommendation aside or have not
been timely in responding to that
recommendation.
So an example would be a recent
benchmarking that we did for a client.
There was an identified area of liability
that came up in our review. It had to
do with compensation received by an
advisor out of the plan and the advice
he was providing to employees. Our
first area of concern was that his
compensation seemed unreasonable. It
was above what others were receiving
for similar services. Secondly, his
agreement with the client disclosed
that he was not a fiduciary, yet he was
providing specific advice to employees.
This very well could lead to liabiilty
for the fiduciaries of the plan. We were
very clear to the client that they needed
to address this issue sooner rather than
later. At this time, they have yet to
examine this further.
How did it turn out? Are they still
clients?
We are hoping to assist them in an
ongoing relationship; I think it’s a
committee that’s fractured in their
appreciation for the risk that they have, as
fiduciaries, to their defined contribution
plan. I think a certain segment of that
committee recognizes the need to get
ongoing assistance and then other parts
of that committee feel they don’t need
the assistance—that the plan just kind of
runs itself. So, stay tuned.
Are you conscious of “absent”
behavior when talking with prospects
or new clients and your exposure?
I think it’s very difficult again to do
what we’ll phrase as “turning the light
switch on” for committees if they don’t
want to hear it. Again, for most of them,
this is not their full time job. They have a
lot on their plate and it’s almost like this
is a nuisance for them to have to carry
out this responsibility.
So the goal of the Westminster
consultant is to be a consultant to “turn
the light on for them,” kind of lead them
to what best practices are, and hope they
recognize the benefit of behaving as the
appropriate fiduciary should.
So what’s better: an empty head or a
good heart?
I think a good heart is certainly better,
but at the end of the day the courts have
been very clear—a good