Advantages for Advisors/Broker Dealers

With over 600,000 retirement plans across the nation, there are not nearly enough retirement plan focused advisors to properly serve the critical needs of plansponsors and participants. (FPR) was created by some of the nation's best consultants to assist advisors who maintain a valuable plansponsor relationship, but do not have a primary focus on plan-level consulting. FPR offers a solution to assist these advisors by shifting plan level investment management fiduciary risk from the broker-dealer and their advisor to FPR through a technology based e-fiduciary service.

Implications of a Fiduciary Standard

  • ERISA requires plan sponsors to select and monitor plan investments in the same manner as persons familiar with generally accepted investment theories and prevailing investment industry practices.
  • Where plan sponsors lack the needed technical knowledge to properly select plan investments, they are required to hire knowledgeable advisers. DOL Regulation §2509.95-1(c)(6) states that, “unless a fiduciary possesses the necessary expertise to evaluate such factors, he would need to obtain the advice of a qualified, independent expert.”
  • There is an increase in high-profile litigation alleging fiduciary breaches on the part of plan sponsors in selecting and monitoring investments.
  • DOL has revised regulation 408(b)(2) that exposes prohibited transactions and fiduciary breaches to a far greater degree.
  • The 2010 Dodd-Frank Act instructs the SEC to adopt a harmonized standard that legally requires RRs and IARs to act in the clients’ best interest, following a six- month study.

Dilemma for Broker-Dealers and Advisors

  • Recordkeepers and TPAs distribute 80% of their plans through Broker Dealer Registered Representatives (RR) whose primary business focus is not retirement plans. This is particularly the case with the small-plans.
  • Because RRs receive compensation that is reported on the Form 5500, there is an assumption by many plan sponsors that their adviser is a competent fiduciary with the necessary skills to oversee the plan investments.
  • In light of the new fiduciary regulations and enforcement powers, the Broker Dealer must provide advisers with solutions that do not expose the firm to undue risk.
  • Broker Dealers derive steady income from retirement plans, and more importantly, they derive substantial income from the participant relationships and subsequent financial planning opportunities outside the plan—particularly from rollovers.
  • Expected new regulations include provisions that require advisers of ERISA plan participants and IRAs, including IRA Rollovers, to meet certification and audit requirements in order to provide investment advice.

Fiduciary Relief for Broker Dealers

  • FPR offers a proven technology based solution providing a “remote” advisory program through an automated, turnkey process to mitigate or eliminate fiduciary risk for plan sponsors and avoid the fiduciary exposure for Broker Dealer Registered Representatives.
  • The process is offered through FPR’s integration with a variety of Recordkeepers, offering a seamless feature at no additional cost to the Broker Dealer.
  • FPR utilizes its technology to evaluate a plan’s current investments with available investments from the provider’s approved list as required by ERISA.
  • Under ERISA Section 3(38), FPR will notify recordkeepers of fund changes before they are to take effect so they can begin the process of participant notification and fund mapping.
  • FPR offers a Warranty, reinsured through Great American Insurance (AA rated), to protect the plan sponsors and recordkeepers from liability.