The current state of regulatory enforcement, litigation, and the creation of new pension laws is a direct result of ineffective fiduciary practices. Confusion over the Employee Retirement Income Security Act's ("ERISA") fiduciary rules, conflicts of interest among service providers, excessive and undisclosed fees, and under funding has led to the highest levels of enforcement sanctions and litigation against plan sponsors in the history of the U.S. pension system. ERISA imposes high standards of fiduciary duty upon those persons responsible for administering an ERISA plan and investing and disposing of its assets.

If a person, who becomes a fiduciary, either intentionally or not, fails to meet these high standards, he or she may be held personally liable for any losses the plan suffers from their breach of duty. It is amazing that so many corporations, and executives whom they employ, voluntarily accept such liability. Their willingness to take such a risk is all the more astonishing since the skills needed to perform safely the duties of a fiduciary are specialized, complex, are not intuitive, and must be acquired through training.

More than five million men and women in the U.S. have the legal responsibility for managing someone else's money. In function they are "Investment Stewards" and they include trustees and investment committee members of retirement plans, foundations, and endowments.

The Investment Steward is responsible for managing the overall investment strategy: deciding on the asset allocation, defining the details of the strategy, implementing the strategy with appropriate investment managers, and monitoring the strategy on an ongoing basis. These are all parts of ERISA's job description for plan sponsors. They are accountable for adhering to a prudent process not for achieving any particular investment outcome. For organizations that sponsor ERISA qualified plans, this is the authentic fiduciary standard.

The term "prudent process" originates with ERISA's definition of a prudent person the so-called "prudent man rule." Section 404(a)(1)(B) of ERISA says that fiduciaries must act: with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. Note how the duty is described in terms of how a fiduciary must act, and not by the results a fiduciary must obtain. Following a defined process is crucial to meeting ERISA's prudence rule because verbal assertions alone won't help a person who is called on to prove their prudence.

In spite of ERISA's clarity about the standard to which people who serve as its plans' managers (i.e., the fiduciaries) are held accountable, a shockingly high number are dangerously close to harsh personal consequences. Fiduciaries that do not adhere to ERISA's fiduciary standard expose their personal assets to legal judgments for imprudent conduct.

Roland|Criss has a solution for organizations that are unfamiliar with ERISA's fiduciary standard. It starts with an assessment of the organization's current practices. Since Roland|Criss is not an investment firm, the assessment is unbiased. It is also thorough, confidential, and a great place to get started on the road to full compliance with laws that can make a fiduciary lose more than just sleep.

Ask Roland|Criss to give you a free online demonstration of the power of its compliance program for Investment Stewards.

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