How advisors can avoid excessive fees lawsuits and become better fiduciaries at the same time

As we can see from the news excessive fee lawsuits are not going away. It makes a lot of sense that it continues to happen because people smell money. The plan participants and the lawyers are on the same team here. And I totally agree with the participants’ logic and drive to find justice and compensation for all the years they were milked by the plan services who charged them excessive fees to write themselves a bonus check at the end of the year. However, this time it is not only a plan sponsor or a record keeper but an advisor who worked with the plan. It should remind all financial professionals that they are fiduciaries of their clients who should put their client’s interest first.

Here, at Larkpsur-RiXtrema, we put a lot of effort researching the fiduciary world to come up with the optimal solution that can help advisers to stay on the top of things in a quickly changing regulatory environment. The 401kFiduciaryOptimizer tool allows the adviser to carefully scan through all available options loaded from a provider list to find highly similar funds, using quantitative algorithms, with the lowest expense ratio and better performance. This easy to use software would optimize the existing menu and show the aggregate savings that can be generated by the low fee alternative funds. Moreover, lower fee fund selection is also based on finding funds with better historical performance.

Plan Monitor, which is part of the 401k Fiduciary Optimizer, would provide the advisor with the dashboard to keep track of the health of their existing clients’ retirement plans by notifying them if any immediate action is necessary to avoid a fiduciary breach. It provides three areas to monitor which are Less Expensive Similar Funds, Less Expensive Share Classes, and Highly Correlated Funds. For example, knowing that less expensive share classes are available and being able quickly to discuss it with the plan sponsor makes a plan fiduciary prudent in his/her effort to act in the best interest of the client. Moreover, Plan Monitor creates a process that documents all steps undertaken to fulfill the fiduciary duty to the client by keeping track of recommendations, actions taken to enhance the menu, results provided based on the advice.


Figure 1. Screenshot of Plan Monitor.

These days a digital tool like Plan Monitor is practically a necessity and can be helpful to both plan sponsors and plan participants, in order to fulfill a fiduciary role. It is also important for a plan fiduciary to know that the detailed and prudent process of screening and monitoring the retirement plans will protect his/her assets from fiduciary liability in case there is a lawsuit.

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