Page 478 - DCAC February 2024 Files

Fiduciary Best Practices

Kyli M. Soto, AIF®, CPFA® Joanne Cinalli, CPFA®
Vice President Senior Manager

Napolean Hill, renowned author of the influential Think & Grow
Rich, writes that “Great achievement is usually born of great sacrifice
and is never the result of selfishness.” Applying this to the fiduciary
responsibilities of overseeing a retirement plan, we are reminded that
we must cast aside our personal interests and don the crown that serves
the greater good. The concept may not be Shakespearean in origin, but
we hope that fiduciaries’ heads rest easy when they diligently follow
these best practices.
For a refresher, a fiduciary is any individual or organization who has a Every penny saved in investment expenses is a penny that a participant
legal duty to act in the best financial interests of someone else . In the retain for their balance, which will grow and compound over time when
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context of overseeing a retirement plan, this duty may include several put to work effectively.
key figures within your organization, including the CFO, Finance Director,
human resources personnel, and anyone who serves as a voting member Have a Prudent Process
of an investment committee or board involved in making discretionary Fiduciaries shoulder a range of essential responsibilities, including the
decisions. Your financial advisor or investment consultant who aids in selection and monitorization of investments and service providers,

the administration of your plan also bear this responsibility. fee monitoring, and ensuring plan compliance with all applicable

Hire a Capable Plan Fiduciaries rules and regulations. How can one effectively manage all of these
duties? The answer lies in the old adage that “practice makes perfect.”
Fiduciaries have a multitude of responsibilities in both their personal Fiduciaries must approach their role with thoughtfulness along with an
lives and professional roles. The intricacies of fiduciary duties may not understanding of the investments within the plan and the quality of

come naturally to everyone, making it essential to surround yourselves recordkeeping services. Being a fiduciary is not about having a crystal
with individuals truly dedicated to this craft. While not all financial ball, although we have received more than one request for one. Rather
advisors are fiduciaries, at Innovest we take great pride in serving in a it is acting as a prudent investor. That means gathering the information
co-fiduciary capacity for each of our clients. We commit to safeguarding necessary to make a decision and evaluating the facts and circumstances
your financial well-being and prioritizing your best interests throughout existing at the time, not relying on hindsight. An Investment Policy

our partnership. Statement (IPS) stands as a critical document that illustrates the process
Conduct Regular and Consistent Meetings a plan is following for selecting and monitoring the investments.
The phrase, “consistency is key,” applies to the role of a fiduciary. We Document, Document, and Document
suggest that your committee meets regularly – quarterly at a minimum Establish and maintain a fiduciary file cabinet, whether paper, electronic,
but at least annually. These sessions do not have to be lengthy and or both. Nurses and doctors know the phrase, “If you didn’t chart it, you
arduous, but establishing a regular cadence for reviewing investment didn’t do it.” The same principle applies for fiduciaries. Without proper
performance, expenses, plan service providers, and operational documentation, it is challenging to ascertain whether something ever
administration of the plan (auditing & testing) is imperative to the occurred. Save copies of essential documents, including investment

successful management of your retirement plan. reports, fee disclosures, meeting minutes, investment policy statement,
Ensure that Fees are Reasonable and Necessary and similar. Document the key decisions that you make in your regular
Plan service providers and investment managers typically do not meetings with summaries or meeting minutes. Innovest also maintains

proactively reach out to say, “Hey, did you know you could pay us less?” a historical timeline that memorializes those decisions and fiduciary
While is not a surprising, it underscores the importance of dedicating action items, including it in the front of every client performance report
time to keeping plan fees current. One prudent step is conducting a to help with that documentation.
request for proposal (RFP) or request for information (RFI) every three Avoid Conflicts of Interest
to five years for your service providers. It does not mean that you must A plan fiduciary is obligated to be loyal and act solely in the best

switch providers, but it is prudent to periodically assess fees to ensure interests of plan participants and their beneficiaries. It is imperative

they remain reasonable. to ensure that guidance is offered and the advice taken is unbiased.

Also, consider regular review of the expense of the investments. Innovest Every investment and service provider should earn their place to
provides this through an annual share class review, a cost comparison work with you and invest your money. Make sure that someone

of current share classes to available alternatives. Plan assets may have is not gaining undue financial benefit from the decisions your

reached a minimum threshold that unlocks access to a lower cost committee makes and confirm that co-fiduciaries genuinely align
share class or new share classes may have become available. Seizing with your goals and objectives, sitting firmly on your side of the table.
the opportunity to reduce investment fees should be a continual effort. 1 Consumer Financial Protection Bureau
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