Westminster Consulting Brochure Endowment & Foundation | Page 19

THE ROLES OF A FIDUCIARY ADVISOR
VS. A NON-FIDUCIARY ADVISOR

subject to the fiduciary standard. As a result, the liability to the
employer is significantly less.

Thus far, we have looked at the relative benefits of working with a
fiduciary advisor and the potential hazards of working with a nonfiduciary advisor. This raises the question: is there any advantage
of working with a non-fiduciary advisor?

Another perceived benefit non-fiduciaries have which fiduciaries
do not possess is with regard to the perception of “self-serving”
transactions under ERISA and therefore the non-fiduciaries are
exposing the employers to less liability than the fiduciaries.

The short answer is “yes”. To begin with, a non-fiduciary advisor
may be a specialist in their particular field. Returning to the car
salesman example, a salesman may know the history and subtleties
of every car on their lot and they could provide a lot of useful
knowledge about their own products. Similarly, a spokesman for
ABC’s Mutual Fund Company may have accumulated a great
deal of knowledge and experience about their products and how
to integrate their product suite into an effective retirement plan
lineup. Fiduciary advisors may take advantage of this expertise
by inviting product specialists to discuss their particular suite of
products. However, the fiduciary has to look at a broad pool of
investment options in order to fulfill the duties set forth under
ERISA. Missing options which apply to individual investors is
done with a certain amount of risk for fiduciaries and the courts
have upheld their liability, especially when they have failed to seek
outside professional advice.

“A fiduciary with respect to a plan shall not –
Deal with the assets of the plan in his own interest or for his own
account;

“A trustee’s lack of familiarity with investments is no excuse:
under an objective standard, trustees are to be judged according to
the standards of others acting in a like capacity and familiar with
such matters. [Marshall v. Glass/Metal Association and Glaziers
and Glassworkers Pension Plan, 507 F. Supp. 378, 2 E.B.C. 1006
(D. Hawaii 1980)]”
The non-fiduciary, subject to the lesser suitability standard can
become a greater expert on certain specific investment options due
solely on the fact that they do not have a duty to find the best option
and can therefore limit their search. Ironically, the limited search
may actually yield the best option for the investor client!
For employer retirement plans, like a 401(k), there is another area
where the roles of fiduciary and non-fiduciary advisors are distinct:
investment advice vs. education. Imagine an employ