Fiduciary Training & Best Practices
Presented by: Ryan Campagna, CFP®, AIF
What is a Fiduciary?
Someone acting in a position of
trust on behalf of, or for the
benefit of, a third party.
It’s About Trust
• Duty of loyalty
• Exclusive purpose
• Utmost good faith
• Prudent expert standard
• Process trumps outcome
Good Stewardship Practices
① Know standards, laws, and trust provisions
② Diversify assets to specific risk/return profile of client
③ Prepare investment policy statement
④ Use “prudent experts” (for example, an Investment Manager or
Advisor) and document due diligence
⑤ Control and account for investment expenses
⑥ Monitor the activities of “prudent experts”
⑦ Avoid conflicts of interest and prohibited transactions
Simple 4-Step Process
1
•Organize
2
•Formalize
3
•Implement
4
•Monitor
1. Organize
• A copy of the IPS, written minutes, and/or files from
investment committee meetings
• Applicable trust documents (including amendments)
• Custodial and brokerage agreements
• Service agreements from providers
2. Formalize
• The Investment Policy Statement defines the duties and
responsibilities of all parties involved.
• The IPS defines monitoring criteria for investment options
and service vendors.
• The IPS defines procedures for controlling and accounting
for investment expenses.
3. Implement
• The investment strategy is implemented in compliance with
the required level of prudence

A due diligence procedure for selecting investment options
exists. Process is consistently applied.
• Applicable Safe Harbor provisions are followed (when
elected)

They are voluntary – the procedures are not compulsory for
the Stewards. However, a Steward choosing not to seek an
available safe harbor bears the risk.

These safe harbors may insulate the Steward from liability
associated with certain investment-related decisions and acts.

404(a), 404(c) & QDIA Safe Harbors
4. Monitor
① Periodic reports compare investment performance against appropriate
index, peer group, and IPS objectives.

The performance of each investment option is periodically compared against
an appropriate index, peer group, and due diligence procedures defined in
the IPS.

“Watch list” procedures for underperforming investment managers are
followed and everything is documented.
② Fees for service are consistent with agreements and with all applicable laws.

Whether the fees are reasonable in light of the services provided

Duty to identify those parties that have been compensated from the fees,
and to apply a reasonableness test to the amount of compensation receive
by any party.
③ Control procedures are in place to periodically review policies for “softdollars”
Hot Topic:
Mutual Fund Revenue Sharing
What is Revenue Sharing?
Management Fee – a charge levied by an investment manager for
managing an investment fund. A mutual fund would be an example.
1.00%
0.75%
Basis
Points
0.50%
0.25%
0.00%
Total:
.50% or
50 bps
50
bps
or
.50%
Management Fee
What is Revenue Sharing?
12B-1 Commission – an annual marketing or distribution fee on a mutual
fund. A broker may receive a commission of 0.25% of assets.
1.00%
0.75%
Basis
Points
0.50%
0.25%
0.00%
.25 bps
OR .25%
Total:
.75%
OR
75 bps
50
bps
OR .
.50%
12B-1 Commission
Management Fee
What is Revenue Sharing?
Sub TA Fee – a fee for mutual fund companies and other financial services
firms to prepare and maintain documents and records relating to shareholders
accounts. Many 401(k) record-keepers receive and keep Sub TA fees.
1.00%
0.75%
Basis
Points
0.50%
0.25%
0.00%
Total:
1.00%
OR
100 bps
25 bps
OR
.25%
Sub TA Fee
25 bps
OR
.25%
12B-1 Commission
50 bps
OR
.50%
Management Fee
Cost over time…
ABC Retirement Plan
• Plan assets:
• Plan Participants:
• Record-keeper:
$10M
100
$25K
• $250 per participant
ABC Retirement Plan 7 years later
• Plan assets:
• Plan Participants:
• Record-keeper:
$20M
120
$50K
• $416 per participant
*The growth of Sub-TA fees due to the growth in account balances far
outpaces the extra administrative burden resulting from the additions in
the work force
What is Revenue Sharing?
In summary….
•
•
Identify and quantify the parties being compensated

Is the fee reasonable in light of services offered?

Evaluate Mutual Fund Share Class

Are they unique services?

Is time for Plan Benchmark study or a more formal RFP?
50 bps
OR .
.50%
Other considerations regarding Revenue Sharing

Unfair allocation of fees from a participant standpoint
Thank you!