According to research from Nationwide Financial Services
Inc., 28% of firms with fewer than 50 employees believe their fiduciary
requirements are not being met. According to Tiffany Grinstead, associate vice
president of Retirement Plans marketing at Nationwide, firms suspect this
because the topic of fiduciary requirements can be overwhelming. These
companies run many different parts of the business, not just employee
retirement plans. “The entire concept of being legally liable makes them very
nervous,” she notes.
Additionally, 28% of plan sponsors lacked a clear
understanding of the Employee Retirement Income Security Act (ERISA). “ERISA is
a fairly complex act,” says Grinstead. “[Plan sponsors] misunderstand what
their personal responsibilities are. They tend to not realize that they are
Based on the research, firms also say they need financial
advisers who are experts on regulatory and legislative issues. Grinstead adds
that plan sponsors of small firms need advisers to spend a lot of time hand-holding.
“This is a great opportunity for advisers to make sure they are strong in the
industry,” she says. “Folks who learn for the first time that they have this
responsibility will look to their adviser [for guidance].”
While ensuring plans comply with regulations ranked as the
most important service advisers can provide all small businesses, other
services placed differently, according to a firm’s size and tenure. For
example, firms with fewer than 50 employees rated “timely resolution of
operational issues” as the second most important service they expect to be
provided, while larger firms placed more value on the “selection and monitoring
of investment options.”
Firms that have been in business for more than 50 years
ranked “investment selection and monitoring” as the second most important
service to support their plan, while businesses less than 10 years old cited
“providing participant advice” as their second priority, behind keeping the
plan in compliance.
Overall, 69% of professional services firms expect an annual or quarterly plan review, and 67% expect educational materials to be available for their participants.