As a fiduciary, you owe the utmost duty to your participants. And, while you may not review a Form CRS for your personal account, it is your duty to understand such information as a Plan Fiduciary.
As a Plan Fiduciary, ever wonder why you do not receive a Form CRS? Well, it’s because you, as a steward of participants money, are held to a fiduciary standard similar to that of an institutional investor.The government assumes you are a professional, qualified fiduciary. This is why they don’trequire you your vendors to provide you with a CRS.
KISC reviews all vendor relationships with a keen eye for conflicts of interest.
Do you understand all of your conflicts of interest? The law assumes you have done your research, so have you?
A great place to start would be the CRS https://adviserinfo.sec.gov/firmWelcome to Investor.gov/CRS | Investor.govpart three under this search. For this discussion, find below disclosureboiler plate found in some Form CRSs and vendor contracts.Note, the company’s name and funds have been replaced with ABC.
In addition to the advisory fee you pay us, we also typically receive compensation from the funds in your account. If our proprietary ABC Funds are available in your ABC account, when you invest in those funds we, or our subsidiaries, make money for advisory and administrative services that we provide to those funds. If nonproprietary funds are available in your ABC account, we typically make money for administrative services that we provide to those funds. This creates a potential incentive for us to encourage you to invest in particular funds based on the additional money we receive. For more details, please see our Form ADV Brochure for ABC, at AdviserInfo.sec.gov.
Please allow me to draw some conclusions about the above vendor disclosure.
- Vendor ABC, and/or its subsidiaries, are making money from your account and they will not directly acknowledge it.
- However, they are disclosing to you their conflict of interest.
- Once notified of your vendor’s conflict of interest, the fiduciary either accepts it as their own conflict or clears it.
- Since the fiduciary has become aware of their vendor’s conflict of interest and not cleared the conflict, it defaults to become the fiduciary’s own accepted conflict.
To Summarize: As a Fiduciary you authorize the vendor’s contract, their invoices, and their disclosure of their conflicts of interest. So, as a fiduciary if any future conflicts of interest issues arise (such as paying excessive fees) the blame lands squarely on you for acknowledging and accepting the excessive fees.
Hopefully you never end up in litigation where Participant Joe says from the witness stand, “My employer knew and accepted they overpaid the Vendorfrom my account;it says right here in exhibit 62, signed by . . .”
Your witness ….