I Made a Promise Mr. Frodo: When to Share Investment Liability with a Fiduciary Financial Advisor


Fiduciary liability can feel like an incredible burden to bear, even for HR professionals. Job requirements day to day are demanding enough without adding retirement plan management on top of it. That’s where a fiduciary financial advisor comes in to help carry the weight of it all.

It’s like being entrusted with a heroic mission, much like Frodo Baggins in Lord of the Rings. Financial advisors are like the Samwise Gamgee’s of the story, the unmovable support that can carry you forward when you’re overwhelmed.

The reality is that much like any hero on a quest to save the world, HR professionals could do it all on their own. They have the smarts and the savviness to become experts in investments. It’s just not the highest use of their time. Managing retirement plans are usually buried at the bottom of to-do lists anyway. It’s tomorrow’s problem.

Tomorrow almost always comes at an inflection point, like a company forced to reduce staff or rework employee benefits. That’s definitely a time to share investment liability with a fiduciary financial advisor.

Christine Dart, vice president and manager for worldwide fiduciary liability at Chubb says it best, “Employees who still have jobs may not be inclined to ‘rock the boat,’ but those who find themselves overboard are more likely to take legal action against employers, especially if their 401(k) plans sustained losses before they were terminated. Fortunately, employers can take steps to possibly reduce the threat of fiduciary liability lawsuits.”

In sharing the weight, an advisor helps in providing guidance for employees, fitting the company’s unique circumstances to a strategy and system that work for both the company and the employees and give HR professionals the results they need with less effort. 

Advisor One breaks down the role of a fiduciary financial advisor in their article, “Three Strategies to Help Clients Reduce Plan Sponsor Liability.”

The first strategy is to “help clients know the ins and outs of their role as a fiduciary and what is required of them.” The second  strategy is in knowing and communicating clearly all fees associated with a retirement plan. The last is taking over full fiduciary duty of investment decisions. They note, “The advisor must serve as an ERISA section (3)38 fiduciary” in order to actually be responsible for the investment decisions. Any other fiduciary could be in name only and they might not share the liability at all. 

For more information on the role of a fiduciary retirement plan advisor and how they work, take a look over our blog article “What Does a Retirement Plan Advisor Do?” or contact us directly below.