Fiduciary Responsibility

The fiduciary duty requires an investment adviser, by law, to act in the best interest of their clients by putting their clients’ interests ahead of their own at all times.

Under the fiduciary duty, an investment adviser must provide advice and investment recommendations that they view as being the best for the client. In addition to being obligated to put clients’ interests ahead of their own, fiduciaries must also adhere to the duties of loyalty and care. An investment adviser, subject to the fiduciary duty, is required to provide up-front disclosures to the client before any contracts are signed to provide investment advice. These disclosures cover important topics such as the investment adviser’s qualifications, services provided, compensation, range of fees, methods of analysis, a record of any disciplinary actions, and possible conflicts of interest. An investment adviser that has a material conflict of interest must either eliminate that conflict or fully disclose to its clients all material facts relating to that conflict.

Administering the plan and managing the assets require certain actions and involve specific responsibilities to be in compliance with ERISA. One requirement has been expanded as recent regulations require more comprehensive written disclosures by service providers to 401(k) plan fiduciaries. The result has been an additional burden on the plan fiduciary to act prudently and solely in the best interest of the plan’s participants and beneficiaries when selecting or monitoring plan service providers.

This increased level of liability positions an employer as the plan fiduciary with needing to provide employees access to specific, unbiased investment advice. Meeting your fiduciary responsibilities can be challenging and complex, with an increasing level of liability and risk of lawsuits for the plan sponsor.

Quantum Strategies Wealth Advisory can position your fiduciary responsibilities with the largest amount of relief available with our 401(k) Administrative Services. Our retirement planning experts work with you to review your existing plans or assist with establishing new plans. Quantum’s 401k consulting group acts as the investment fiduciary 3(38) and works with the board to determine if an administrative fiduciary 3(16) is desirable.

Offering a retirement plan to your employees can be a competitive component in assisting with employee retention. Making a retirement plan a part of your employee’s benefits package can position you to attract and retain top talent. The employees participating in the plan, their beneficiaries and you, the employer, all benefit when a retirement plan is in place.

When you work with a 3(38) fiduciary, your liability is limited to the fullest extent. As a 3(38) fiduciary, Quantum Strategies Wealth Advisory makes all of the investment decisions and takes responsibility for them. Our team selects and monitors the funds, making changes when necessary. It is important to note that your liability is limited but does not fully eliminate your fiduciary responsibilities. However, your liability is limited to prudently selecting and monitoring the 3(38) fiduciary and benchmarking the reasonableness of their fees.

A 3(16) fiduciary typically handles administrative functions, such as reporting and disclosure requirements. A 3(16) fiduciary must ensure that the plan is created and managed according to the criteria set forth in the Employee Retirement Income Security Act (ERISA), which is the law that governs retirement plans. A 3(16) fiduciary’s duties could range from processing hardship withdrawals, creating and updating summary plan descriptions, sending participant notices and disclosures, and filing the Form 5500.

If the plan has no administrator, you automatically take on this role as the plan sponsor and also assume the related liability.