In
early December, I participated in a trustee meeting presided over by Matthew D.
Hutcheson. Some in the 401(k) industry may
wonder exactly what an independent fiduciary like Mr. Hutcheson does. Here's a
first-hand report.
The
meeting resembled your standard year-end 401(k) meeting, but with some intriguing
differences. What struck me was how the executives at this successful Silicon Valley
company treated Mr. Hutcheson with absolute deference and respect. As well they
should. After all, he's the named fiduciary for their plan. But it was more
than just deference and respect. There was a genuine sense of trust and confidence that
defined the exchange. The executives of this company knew they were in good hands, and they
knew Mr. Hutcheson was taking care of their employees.
During
the meeting, we discussed a few of the unique methods he employees with his
clients. One of those, of course, is
appointing an independent investment fiduciary to assemble and maintain the plan's portfolios. Participants do not choose the underlying
funds (at least not without having a spouse or other primary beneficiary sign a
waiver). When I asked how many participants had complained or expressed concern
about this, the CFO gave the "zero" sign and said "none." I've always wondered
how Hutcheson could manage plans with hundreds of thousands of participants
without becoming overwhelmed. Now I know; no one complains or expresses concerns
about the design or operation of the plan. He has created an environment of such
confidence and trust, and has communicated key features of the plan so
effectively, that participants know their interests are well-served.
Another
important observation: The meeting was absolutely straightforward and efficient.
First, Hutcheson asked me pointed questions. After seeking clarification, he
turned and explained my answers to the company representative. Knowing what is
relevant and what is not, we didn't get bogged down in complexities, jargon, emotional
speculation, or financial services sales-talk. He kept the meeting on course,
asking questions, reporting information, and covering all important matters pertaining
to the management and operation of the sponsor's 401(k) plan. The entire
meeting took about an hour.
Because
my firm has been appointed by Hutcheson, I report to him, not the company. That
arrangement leaves little room for misunderstanding or miscommunication.
I
took three things from the meeting.
First,
the company that appointed Hutcheson to be the independent named fiduciary
sought him out because that is what they wanted. They wanted to sponsor the
plan; they didn't want to run it. They now have no day-to-day responsibility
for the plan. All of that rests squarely on Hutcheson's shoulders, right where
it should be, with a professional fiduciary. Once corporate America figures
that out, we may well see an independent fiduciary revolution.
Second,
because Hutcheson appointed me to my position as investment fiduciary, my
colleagues and I were viewed as professional equals with him. Too often,
investment advisors are seen as--and, to be honest, sometimes are--salespeople rather
than professionals with valuable expertise.
Third,
there was absolute clarity about the plan's objectives, who was responsible for
what, and a clear chain of accountability.
In total, the experience suggested that companies should focus on what they do best and
get out of the retirement plan management
business once and for all. It also reinforced my sense that participants appreciate having
an independent fiduciary-advocate.
Bottom
line: Sponsors who want to do right by their employees, reduce their own legal
exposure, and simplify their daily lives should consider hiring an independent
fiduciary such as Mr. Hutcheson.
