Retirement professionals, national surveys and industry constituents all agree on one thing - the top issue facing retirement plan sponsors today is fiduciary responsibility. Is your fiduciary process adequate and do those involved have the expertise needed?
At Generation Capital Management we are held to higher standards than stockbrokers because we are set-up as a Registered Investment Advisor. Independent RIAs are held to a Fiduciary Standard while stockbrokers are only held to a Suitability Standard.
Retirement plan fiduciaries have the duty to identify, understand and evaluate fees and expenses associated with plan investments, investment options and the service providers. Acting as the investment advisor to retirement plans, we are able to provide this service to plan sponsors. We do not collect fees from the retirement plan which allows us to put the proper funds in the lineup and act as a trusted partner to the plan. Our judgment is not clouded by hidden fees.
Advisors who are fiduciaries must always act in the best interest of their clients. They must set aside personal interests to serve the client. They must also disclose all their fees and any conflicts of interest.
They do not engage in other business activities like investment banking or underwriting. Brokerage firms normally do engage in these types of businesses. These other activities often become a conflict of interest. A brokerage firm may be taking a company public and thus heavily promoting it to their customers. Or they may hold a large stock position and offer incentives for brokers to “move it”.
A stockbroker is not a fiduciary. They do not have to disclose their various compensation structures or their conflicts of interest. Stockbrokers, while they try to hide behind terms such as financial advisors, financial consultants, and investment specialists, are merely salespeople for a brokerage firm. They do not have to act in your best interest; they only have to meet suitability standards.
Suitability standards basically say that the brokerage firm can recommend certain funds if they believe that they are suitable for the particular plan. There may be plenty of "suitable" investments, but that doesn't mean they are in the plan’s best interest. A high-commission, high-expense proprietary mutual fund with a lagging track record could be deemed suitable.