Questions to Ask any Fiduciary Services Partner
As Plan Sponsor, you are responsible for managing a prudent process for selecting investments and managing all aspects of your employees’ retirement plans. Are you in compliance? The questions below are designed to help you determine if you are.
Process of Prudence Questions
- When was the last time you updated your bylaws?
- Do you have thorough company records that you can put your hands on instantly should you be audited?
- What is the formalized process that you follow to add or delete funds from your roster of funds for your employees?
- How do you educate your employees?
- What are your participation ratios? How many employees participate and to what amount? Is participation equal to industry standards?
Investment Management Questions
Asset Allocation Level
- What do current price levels signal about future expectations?
- What do current price levels suggest about the attractiveness or riskiness of a particular asset class?
- How are equity portfolios allocated from capitalization and sector perspectives? Additionally, are international equity portfolios diversified from a geographic perspective? How are these decisions made?
- How are fixed income portfolios allocated from maturity, credit-quality and issue-type perspectives? How are these decisions made?
- How is “downside risk” measured and managed?
Fund Selection Level
- In which cases is it best to invest “passively?” In which circumstances/conditions can actively-managed funds add value?
- How is the fund’s internal compensation and incentive program structured? Is the fund’s incentive structure linked to performance? Could unintended consequences arise from increased risk?
- Does the fund’s manager have a competitive or informational advantage that coincides with the fund’s strategy and/or investment area?
- What market anomaly or inefficiency is the fund trying to capture?
- How are trading costs monitored and minimized?
- How does a fund structure its research process, and what is the structure by which individual securities are bought and sold?
- Statistically, how closely do a fund’s investments reflect those of its stated benchmark?
- What is “window-dressing?” Why is it bad for investors, and how is it detected?
- Has the fund sponsor and/or manager been subject to any audits, censures or inquiries by the SEC, IRS, State Attorney or DOL?
Working with Safe Harbor Partners
Safe Harbor Partners accepts in writing and serves as a fiduciary advisor to the retirement plans of small to mid-size companies and not-for-profits. We act as either a 3(21) or 3(38) advisor to Plan Sponsors, depending on your unique set of circumstances.
This means we can advise you regarding – or accept the authority in – selecting, managing and replacing the investment options as required to ensure your plan meets your initial selection criteria.
We will review to see if you have a process and prudence in place for establishing and managing your retirement plan according to the expectations of the regulatory bodies. If your process of prudence falls short, we will provide specific recommendations to ensure you meet your obligations.
We will also review and provide feedback on the investment funds in your plan, based on our enhanced due diligence.
Finally, we will keep you abreast of regulatory changes and requirements so that you continue to meet your fiduciary responsibilities.