Hire an independent consultant
Top 10 ways to reduce your fiduciary liability #6
One fiduciary liability mitigation technique is to hire professional individuals or entities to handle specific fiduciary responsibilities. Individuals who are trustees take on additional exposure to liability. Such exposure may be reduced if a professional trustee or investment manager is hired either to replace or to assist the individual trustees.
Although plan sponsors may hire advisors to help make plan decisions, the plan trustees cannot relieve themselves of the responsibility to carefully select and monitor professional trustees and investment managers periodically.
Fiduciaries and trustees may look to hire outside professional trustees, investment managers and co-fiduciaries to help make plan decisions. Lawyers, consultants and third-party administrators might assist their clients with the practical implications of being a fiduciary by:
- Helping plan sponsors understand their responsibilities
- Assisting with hiring a professional trustee or investment manager
- Recommending the indemnification of certain fiduciaries
- Recommending the purchase of fiduciary liability insurance
Remember, the prudency level required for fiduciary decisions is high, so in any areas where well-documented expertise is not available in-house, the DOL suggests it be provided from an independent service provider. The DOL is concerned that many plan fiduciaries “don’t know what they don’t know” and there is plenty of evidence to support that contention. Working with an independent consultant can help fiduciaries understand the questions they need to ask.