Monitoring Recordkeepers’ Advice and Education Services: Things to Consider

shutterstock_402879268_blog.pngIf you are reading this blog, you surely understand that plan fiduciaries have an obligation to monitor their investments and the fees participants pay. Over the past decade, knowledgeable plan fiduciaries have instituted regular fee benchmarking to monitor and negotiate the fees they are paying for plan services. Coinciding with the implementation of regular fee benchmarking has been a steady decline in plan fees. But is fee benchmarking enough?

Retaining a recordkeeper to perform plan administration, recordkeeping, and participant education services is a fiduciary function and, as such, plan fiduciaries are required to periodically monitor their recordkeeper to ensure they are performing the agreed-upon services. For certain recordkeeping and administration services, this is pretty straightforward. As plan fiduciaries, you monitor your vendor to make sure your they are processing contributions, distributions, and loans; performing annual compliance testing and 5500 services; and updating your plan document when you request amendments or changes.

While these services are generally monitored by most plan fiduciaries, one major overlooked area of vendor management is with respect to participant education, communication, and advice. In my experience, this is often an area of focus when plan fiduciaries conduct a vendor search, but once a vendor is chosen, ongoing oversight of the education and communication services provided by the vendor is neglected as plan fiduciaries deal with the myriad of other issues on their plate.

The new Department of Labor (DOL) fiduciary rule, and the resulting changes in some vendors’ business models, raises the responsibility for monitoring the services that your vendor provides to employees.

In order to monitor the contractual participant services start by reviewing what you have contracted for and how many days are being delivered. Additionally, and more specifically, plan fiduciaries need to consider:

  • Is the provider offering education or advice for investments and distribution decisions? If so, will it use salaried or commission staff or use a third-party for these services?
  • What is their approach to the DOL fiduciary rule?
  • Will services be provided in person, online, or via a call center?
  • How broad is the financial education and advice they provide? Is it focused only on retirement or more broadly focused on financial wellness?
  • Are there any potential conflicts of interest in the vendor’s service model? If so, how do they mitigate them?
  • Do they use proprietary or third-party investment models (either as education or point in time advice)? If so, how does the vendor assist the participants in understanding the questions and answers of the third-party system?
  • Does the provider have aggregation tools to use in retirement readiness calculations?
  • Has the provider delivered the agreed upon services outlined in the contract?
  • How are they measuring the efficacy of their efforts?
  • What other resources do service providers offer participants?
  • Have there been any participant complaints about these services?

Adding a regular review of your Plan’s participant services vendor will help you fulfill your fiduciary responsibilities and will also likely improve the level of service that your participants receive from their vendor. If you need help getting started please feel free to contact a Multnomah Group consultant.

Multnomah Group is a registered investment adviser, registered with the Securities and Exchange Commission. Any information contained herein or on Multnomah Group’s website is provided for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.   Investments involve risk and, unless otherwise stated, are not guaranteed.  Multnomah Group does not provide legal or tax advice.  

Any views expressed herein are those of the author(s) and not necessarily those of Multnomah Group or Multnomah Group’s clients.

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