Industry News

WHO IS A FIDUCIARY?

On October 21, 2010, The United States Department of Labor (DOL) released a proposed regulation that would substantially broaden the circumstances under which a person would be deemed a "fiduciary". Since then there have been a number of articles appearing in the industry press about the implications of the new regulation. To quote directly from the Year in Review issue of PlanSponsor, "Fiduciaries must act solely in the interests of plan participants, and must act with care, skill, prudence , and diligence in doing so. ...the Prudent Man Rule (ERISA section 404(a)(1)(B)) requires that a plan fiduciary use the "care, skill, and diligence" that would be used by a reasonably prudent person familiar with such matters-and by "familiar", the consensus meaning is someone with expertise. Moreover, that expertise will not be prudent for long if it fails to take into account new developments in the law or marketplace. That means that the "new" fiduciary must understand how things like revenue sharing, target-date glide paths, and share-class selection can affect your program." Concern has been expressed in some quarters that the new regulation expands the definition to not only make brokers working with plans fiduciaries, but could also be applied to firms that provide investments, including mutual fund groups, platforms and record-keeping services. The Investment Company Institute was so alarmed that it wrote a letter asking for an exception to allow service providers to help plan sponsors pick funds for their own investment menus. We at Fiduciary Capital Management have long embraced our responsibilities as fiduciaries and very consciously selected our firm's name 24 years ago to tell the world that we take the Prudent Man Rule very seriously. For many years, there have been service providers that we deemed to be fiduciaries who shirked accepting the responsibility. We and , according to the February 7, 2011 issuer of P&I, the Certified Financial Planner Board of Standards support the expansion and urge the DOL to limit the scope of any exceptions and require disclosure in writing when advisors are not providing impartial advice.

(Sources: Pensions &Investments and PlanSponsor)

Updated 3/11/11