Here's the basic idea. If you're a fiduciary, there's one simple rule. Follow this rule and you'll never go wrong. Stray from this rule into gray areas, and things can get a bit complex. If you outright shun this rule, then regulators will soon come pounding on your door and having a good attorney in your rolodex may be called for. Here's the rule: Always act solely in the best interests of the plan beneficiaries.
Now, here's the tricky part. The world of the fiduciary should not be confused with the world of business. In the business world, companies often succeed by adopting the motto "The customer is always right." Here's where the confusion comes in. Some good-hearted folks tend to like the 401(k) beneficiary (usually the "plan participant" or "employee") to "customers." This leads to confusion as to what their fiduciary duty entails. Unfortunately, they can find "acting solely in the best interests of the plan beneficiaries" does not mean the same thing as "the customer is always right."
Quite frankly, what beneficiaries want may not necessarily be in their best interests.
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Christopher Carosa
Chris Carosa has been writing a weekly article and monthly column for BenefitsPRO online and BenefitsPRO Magazine since 2011 and is a nationally recognized award-winning writer, researcher and speaker. He’s written seven books, including From Cradle to Retire: The Child IRA; Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort; A Pizza The Action: Everything I Ever Learned About Business I Learned By Working in a Pizza Stand at the Erie County Fair; and the widely acclaimed 401(k) Fiduciary Solutions. Carosa is also Chief Contributing Editor of the authoritative trade journal FiduciaryNews.com and publisher of the Mendon-Honeoye Falls-Lima Sentinel, a weekly community newspaper he founded in 1989. Currently serving as President of the National Society of Newspaper Columnists and with more than 1,000 articles published in various publications, he appears regularly in the national media. A “parallel” entrepreneur, he actively runs a handful of businesses, including a small boutique investment adviser, providing hands-on experience for his writing. A trained astrophysicist, he also holds an MBA and has been designated a Certified Trust and Financial Advisor. Share your thoughts and story ideas with him through Facebook (https://www.facebook.com/christophercarosa/)and Twitter (https://twitter.com/ChrisCarosa).
