Yesterday, we railed against the vacuous marketing concept of "co-fiduciary" services in the retirement plan world. Today, we ran across Scott Simon's latest "Fiduciary Focus" column from Morningstar. As usual, Scott has it exactly right. Here are three key paragraphs (emphasis added in bold):
I have discussed in a number of these columns over the years how plan sponsors can, in accordance with the provisions of ERISA section 3(38), delegate their duties to select, monitor and (if necessary) replace a plan's investment options to a bank, registered investment advisor or insurance company. The off-loading of such fiduciary duties from the shoulders of plan sponsor executives and their transfer onto the shoulders of such entities is significant and provides immense value to such executives.
Yet this kind of delegation is rarely undertaken because the non-fiduciary business model followed by so much of America's retirement plan industry doesn't provide for plan sponsors to become informed about it. If plan sponsors were informed fully about the option of making such a valuable delegation, then the vast number of those participating in the industry--not fiduciaries in any way, shape, or form--might have to change their business model and actually become fiduciaries.
We won't be holding our breath.(By the way, here's a direct link to the first entry in this series on fiduciary delegation.)
Scott gives us plenty to look forward to in his next entry in this series, with this closing tease:
Good question. With a blindingly obvious answer.
W. Scott Simon, "Delegation for Plan Sponsors (Part 2)," Morningstar Advisor, May 7, 2009