As a plan sponsor and fiduciary, it may be tempting to use your brother-in-law, old college roommate or golf buddy as your company’s retirement advisor.
After all, you know them well and they would never steer you in the wrong direction, right? However, ERISA’s rules are crystal clear: every decision you make as a fiduciary must be in the best interests of plan participants and their beneficiaries and certain relationships may result in prohibited transactions.
Your personal or corporate relationship with your company’s retirement plan advisor may create a conflict of interest. Be especially cautious when your personal financial advisor solicits your company’s retirement business. The fact that he works with you on personal matters could be interpreted as being in conflict with his providing services to your company. And more importantly, such an engagement could result in your having involved the plan in a prohibited transaction. Is he making recommendations on your company’s retirement plan that are benefiting you on a personal level? If so, or if that is even a remote possibility, the engagement is likely a prohibited transaction needing correction, filings and potentially penalties.
If questioned with regard to your selection of your retirement plan advisor, ideally you should cite your advisor’s expertise, independence, proven track record and the process you undertook in selecting the advisor. You do not want to be perceived as having chosen your retirement advisor because of a personal relationship.