If ERISA governs your retirement plan, the law requires a fiduciary to act as a prudent expert would act. Even for a church plan or governmental plan, State law often requires a similar high standard of care.

Prudence requires getting the advice of experts. Whether it’s investment knowledge or understanding what the law requires, you can’t make careful decisions unless you have (and understand) the information you need to make your decisions. (And remember that neglecting to decide something is itself a decision.)

If you already have an investment consultant (look for an SEC-registered investment adviser that has no conflict of interest), that’s a good step. But the law doesn’t allow you to just say yes to a consultant’s recommendations. Instead, you must evaluate the background and reasoning behind each recommendation and make your own careful decision. And you can’t begin to put any consultant’s analysis in context until you know your plan and the law that applies to it.

Beyond selecting investment options, administering a retirement plan involves many decisions with many choices. You can’t administer a plan according to its terms and applicable law unless you know the law that you must comply with. And you can’t act as an expert would unless you know as much as an expert knows. Unless you’re an expert employee-benefits lawyer, you can’t act as an expert would unless you first consider an expert lawyer’s advice.

It’s never prudent to rely on legal advice given by someone who isn’t licensed to practice law or who works for a business with interests beyond the best interests of you and your plan. A businessperson sometimes thinks that he or she can understand the biases of a conflicted person’s advice, and takes the risks of using a substitute for real advice. While that might be allowed for a business, it’s not okay for a fiduciary. As a fiduciary, you’re making decisions for others, so it’s not right to take those risks. The law presumes that a prudent fiduciary wouldn’t rely on conflicted advice; this could make you liable for not acting as a prudent expert would have acted. Further, you might be unable to sue the nonlawyer for malpractice because a court might decide that it wasn’t reasonable for you to expect legal advice from a nonlawyer.

Did you know that Federal law requires a national bank’s fiduciary group to keep a lawyer on hand? The law presumes that a bank can’t be a competent fiduciary without a lawyer at the ready. Can someone who isn’t in the full-time business of serving as a fiduciary do a good job with less help?

For more information, contact Fiduciary Guidance Counsel at (215) 732-1552 or send an email.

Fiduciary Guidance Counsel
504 South 22nd Street
Philadelphia, PA 19146
(215) 732-1552
Fax (215) 689-2930
Email peter@fiduciaryguidancecounsel.com