{"id":1163,"date":"2013-07-16T09:46:01","date_gmt":"2013-07-16T16:46:01","guid":{"rendered":"http:\/\/staging-prblog.paladinregistry.com\/blog\/?p=1163"},"modified":"2014-01-21T15:27:08","modified_gmt":"2014-01-21T23:27:08","slug":"distinguishing-true-independent-professional-advisors-from-phantom-fiduciaries","status":"publish","type":"post","link":"https:\/\/www.paladinregistry.com\/blog\/wall-street\/distinguishing-true-independent-professional-advisors-from-phantom-fiduciaries\/","title":{"rendered":"Distinguishing True Independent Professional Advisors from Phantom Fiduciaries"},"content":{"rendered":"

\"Distinguishing<\/a>This is Part\u00a02 of a six part series on choosing a 401k plan advisor.<\/em><\/p>\n

While there are many independent professional advisors to whom a plan sponsor can delegate fiduciary responsibility, and therefore potential fiduciary liability, there are many more non-fiduciary service providers marketing themselves and their salespeople as independent experts. These \u201cPhantom Fiduciaries\u201d walk the walk and talk the talk, but in the fine print of their contracts they disavow themselves of any true fiduciary responsibility thus leaving the trusting plan sponsor on the fiduciary hook. More on Phantom Fiduciaries and their tricks at \u201cRetirement Plans, The Wizard of Oz & You<\/a>.\u201d<\/p>\n

In order to distinguish the wheat from the chaff, here are some topics for discussion with a potential advisor:<\/p>\n

Are you a registered representative (aka. financial advisor\/consultant, representative, agent, broker, account executive, wealth manager, or full-service investment advisor) or a Registered Investment Advisor?\u00a0 <\/b><\/p>\n

By law, registered representatives are held to the \u201cSuitability Standard\u201d while Registered Investment Advisors (RIA\u2019s) are held to the \u201cFiduciary Standard.\u201d The suitability standard is akin to non-malfeasance and might be restated as the \u201cdo no harm\u201d standard. A registered representative has no obligation to place your interests above his own. The fiduciary standard is akin to beneficence and might be restated as the \u201cdo good\u201d standard. For a registered representative to violate the Suitability Standard, he must proactively harm you. An RIA violates the Fiduciary Standard if he fails to put your best interests ahead of his own!<\/p>\n

By virtue of their employment contract, registered representatives have an obligation of loyalty to their broker-dealer. By law, an RIA has an obligation of loyalty to his client.<\/em><\/strong><\/p>\n

Given an array of 401k products, a registered representative can choose to sell you just about any product, even if this product will prevent you from fulfilling your fiduciary duty (via fiduciary paradox<\/a>); for example: the product that makes the salesperson a bigger commission; the product his firm is pushing that week; or proprietary products which make his firm more money.\u00a0 Some broker-dealers market themselves as independent and unbiased, while only offering to their clients & prospects those products that \u201cpay to play\u201d or provide \u201ckickbacks,\u201d and do not permit their representatives to sell products that refuse to participate in such schemes.<\/p>\n

Under ERISA Section 409, fiduciary responsibility carries a personal liability. As a 401k plan sponsor you have potential personal liability, if you fail to fulfill your fiduciary duties. Is it more prudent to seek advice from a salesperson, whose loyalty by virtue of their employment contract is to his or her broker dealer and whose responsibility to you is limited to the \u201cSuitability Rule\u201d; or is it more prudent to seek advice from an Independent Fiduciary<\/a>, who either shares or assumes your fiduciary risk as an ERISA 3(38) Fiduciary, and who by law and by contract, is loyal ONLY to you and your participants?<\/p>\n

In no way am I disparaging all broker-dealers, nor all registered representatives. Nor does it imply that all RIA\u2019s are flawless. However, the fact is that registered representatives and their broker-dealers are in the business of selling products and the law governing them is designed as such. Registered Investment Advisors are in the business of providing advice for a fee, and the laws governing them are designed as such. More importantly, the laws governing fiduciaries, including Independent Fiduciaries who assume ERISA 3(38) status are among the \u201chighest known to the law.\u201d \u00a0Brussian v. RJR Nabisco, 5th<\/sup> Circuit Court, 2000<\/b><\/i><\/i><\/p>\n

To learn more about Mark Mensack, visit his sites at www.prudentchampion.com<\/a> and\u00a0 www.fiduciaryplangovernance.com<\/a>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

This is Part\u00a02 of a six part series on choosing a 401k plan advisor. While there are many independent professional advisors to whom a plan sponsor can delegate fiduciary responsibility, and therefore potential fiduciary liability, there are many more non-fiduciary service providers marketing themselves and their salespeople as independent experts. These \u201cPhantom Fiduciaries\u201d walk the walk and talk the talk, but in the fine print of their contracts they disavow<\/p>\n","protected":false},"author":6,"featured_media":1167,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-1163","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-wall-street"],"yoast_head":"\nDistinguishing Professional Advisors from Phantom Fiduciaries<\/title>\n<meta name=\"description\" content=\"Learn how to differentiate between a true independent professional advisors from phantom fiduciaries.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.paladinregistry.com\/blog\/wall-street\/distinguishing-true-independent-professional-advisors-from-phantom-fiduciaries\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Distinguishing Professional Advisors from Phantom Fiduciaries\" \/>\n<meta property=\"og:description\" content=\"Learn how to differentiate between a true independent professional advisors from phantom fiduciaries.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.paladinregistry.com\/blog\/wall-street\/distinguishing-true-independent-professional-advisors-from-phantom-fiduciaries\/\" \/>\n<meta property=\"og:site_name\" content=\"Paladin Registry Blog\" \/>\n<meta property=\"article:published_time\" content=\"2013-07-16T16:46:01+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2014-01-21T23:27:08+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2013\/07\/phantom-fiduciaries.png\" \/>\n\t<meta property=\"og:image:width\" content=\"339\" \/>\n\t<meta property=\"og:image:height\" content=\"149\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/png\" \/>\n<meta name=\"author\" content=\"Mark Mensack\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@PrudentChampion\" \/>\n<meta name=\"twitter:site\" content=\"@PaladinRegistry\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Mark Mensack\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/wall-street\/distinguishing-true-independent-professional-advisors-from-phantom-fiduciaries\/\",\"url\":\"https:\/\/www.paladinregistry.com\/blog\/wall-street\/distinguishing-true-independent-professional-advisors-from-phantom-fiduciaries\/\",\"name\":\"Distinguishing Professional Advisors from Phantom Fiduciaries\",\"isPartOf\":{\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/wall-street\/distinguishing-true-independent-professional-advisors-from-phantom-fiduciaries\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/wall-street\/distinguishing-true-independent-professional-advisors-from-phantom-fiduciaries\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2013\/07\/phantom-fiduciaries.png\",\"datePublished\":\"2013-07-16T16:46:01+00:00\",\"dateModified\":\"2014-01-21T23:27:08+00:00\",\"author\":{\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/#\/schema\/person\/3518e2d9d53f0a3e4b30d3b87b3be976\"},\"description\":\"Learn how to differentiate between a true independent professional advisors from phantom fiduciaries.\",\"breadcrumb\":{\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/wall-street\/distinguishing-true-independent-professional-advisors-from-phantom-fiduciaries\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.paladinregistry.com\/blog\/wall-street\/distinguishing-true-independent-professional-advisors-from-phantom-fiduciaries\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/wall-street\/distinguishing-true-independent-professional-advisors-from-phantom-fiduciaries\/#primaryimage\",\"url\":\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2013\/07\/phantom-fiduciaries.png\",\"contentUrl\":\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2013\/07\/phantom-fiduciaries.png\",\"width\":339,\"height\":149},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/wall-street\/distinguishing-true-independent-professional-advisors-from-phantom-fiduciaries\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.paladinregistry.com\/blog\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Wall Street\",\"item\":\"https:\/\/www.paladinregistry.com\/blog\/category\/wall-street\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"Distinguishing True Independent Professional Advisors from Phantom Fiduciaries\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/#website\",\"url\":\"https:\/\/www.paladinregistry.com\/blog\/\",\"name\":\"Paladin Registry Blog\",\"description\":\"Helping You Make Better Financial Decisions\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.paladinregistry.com\/blog\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/#\/schema\/person\/3518e2d9d53f0a3e4b30d3b87b3be976\",\"name\":\"Mark Mensack\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2013\/10\/Mensack-Pic-240x300-e1432767378886-96x96.jpg\",\"contentUrl\":\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2013\/10\/Mensack-Pic-240x300-e1432767378886-96x96.jpg\",\"caption\":\"Mark Mensack\"},\"description\":\"Mark Mensack, AIFA\u00ae, GFS\u00ae is affiliated with Fiduciary Plan Governance, LLC. and the Centre for Fiduciary Excellence (CEFEX) where he serves as an independent fiduciary consultant, and a CEFEX Analyst. Mark has a Masters in Philosophy from the University of Pennsylvania and is a former US Army Officer. His final active duty assignment was on the faculty of the United States Military Academy at West Point, NY where he taught Philosophy, Ethics & Critical Reasoning. He has nineteen years of financial services experience; fourteen as a financial advisor with broker-dealers, and five as an RIA. His expertise is in the area of fiduciary best practices, 401k hidden fees and ethical issues in the retirement plan marketplace. Mark also writes the 401k Ethicist column for the Journal of Compensation & Benefits and is listed among the 2013 Top 100 Most Influential People in the 401k Industry; some of his work can be found at www.PrudentChampion.com. Mark welcomes examples of ethical issues in the retirement plan space, and especially misleading 401k marketing materials at 401kEthicist@PrudentChampion.com\",\"sameAs\":[\"http:\/\/www.prudentchampion.com\",\"http:\/\/www.linkedin.com\/in\/mensack\",\"https:\/\/x.com\/PrudentChampion\"],\"url\":\"https:\/\/www.paladinregistry.com\/blog\/author\/mark-mensack\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Distinguishing Professional Advisors from Phantom Fiduciaries","description":"Learn how to differentiate between a true independent professional advisors from phantom fiduciaries.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.paladinregistry.com\/blog\/wall-street\/distinguishing-true-independent-professional-advisors-from-phantom-fiduciaries\/","og_locale":"en_US","og_type":"article","og_title":"Distinguishing Professional Advisors from Phantom Fiduciaries","og_description":"Learn how to differentiate between a true independent professional advisors from phantom fiduciaries.","og_url":"https:\/\/www.paladinregistry.com\/blog\/wall-street\/distinguishing-true-independent-professional-advisors-from-phantom-fiduciaries\/","og_site_name":"Paladin Registry Blog","article_published_time":"2013-07-16T16:46:01+00:00","article_modified_time":"2014-01-21T23:27:08+00:00","og_image":[{"width":339,"height":149,"url":"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2013\/07\/phantom-fiduciaries.png","type":"image\/png"}],"author":"Mark Mensack","twitter_card":"summary_large_image","twitter_creator":"@PrudentChampion","twitter_site":"@PaladinRegistry","twitter_misc":{"Written by":"Mark Mensack","Est. reading time":"3 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/www.paladinregistry.com\/blog\/wall-street\/distinguishing-true-independent-professional-advisors-from-phantom-fiduciaries\/","url":"https:\/\/www.paladinregistry.com\/blog\/wall-street\/distinguishing-true-independent-professional-advisors-from-phantom-fiduciaries\/","name":"Distinguishing Professional Advisors from Phantom Fiduciaries","isPartOf":{"@id":"https:\/\/www.paladinregistry.com\/blog\/#website"},"primaryImageOfPage":{"@id":"https:\/\/www.paladinregistry.com\/blog\/wall-street\/distinguishing-true-independent-professional-advisors-from-phantom-fiduciaries\/#primaryimage"},"image":{"@id":"https:\/\/www.paladinregistry.com\/blog\/wall-street\/distinguishing-true-independent-professional-advisors-from-phantom-fiduciaries\/#primaryimage"},"thumbnailUrl":"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2013\/07\/phantom-fiduciaries.png","datePublished":"2013-07-16T16:46:01+00:00","dateModified":"2014-01-21T23:27:08+00:00","author":{"@id":"https:\/\/www.paladinregistry.com\/blog\/#\/schema\/person\/3518e2d9d53f0a3e4b30d3b87b3be976"},"description":"Learn how to differentiate between a true independent professional advisors from phantom fiduciaries.","breadcrumb":{"@id":"https:\/\/www.paladinregistry.com\/blog\/wall-street\/distinguishing-true-independent-professional-advisors-from-phantom-fiduciaries\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.paladinregistry.com\/blog\/wall-street\/distinguishing-true-independent-professional-advisors-from-phantom-fiduciaries\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.paladinregistry.com\/blog\/wall-street\/distinguishing-true-independent-professional-advisors-from-phantom-fiduciaries\/#primaryimage","url":"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2013\/07\/phantom-fiduciaries.png","contentUrl":"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2013\/07\/phantom-fiduciaries.png","width":339,"height":149},{"@type":"BreadcrumbList","@id":"https:\/\/www.paladinregistry.com\/blog\/wall-street\/distinguishing-true-independent-professional-advisors-from-phantom-fiduciaries\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.paladinregistry.com\/blog\/"},{"@type":"ListItem","position":2,"name":"Wall Street","item":"https:\/\/www.paladinregistry.com\/blog\/category\/wall-street\/"},{"@type":"ListItem","position":3,"name":"Distinguishing True Independent Professional Advisors from Phantom Fiduciaries"}]},{"@type":"WebSite","@id":"https:\/\/www.paladinregistry.com\/blog\/#website","url":"https:\/\/www.paladinregistry.com\/blog\/","name":"Paladin Registry Blog","description":"Helping You Make Better Financial Decisions","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.paladinregistry.com\/blog\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/www.paladinregistry.com\/blog\/#\/schema\/person\/3518e2d9d53f0a3e4b30d3b87b3be976","name":"Mark Mensack","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.paladinregistry.com\/blog\/#\/schema\/person\/image\/","url":"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2013\/10\/Mensack-Pic-240x300-e1432767378886-96x96.jpg","contentUrl":"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2013\/10\/Mensack-Pic-240x300-e1432767378886-96x96.jpg","caption":"Mark Mensack"},"description":"Mark Mensack, AIFA\u00ae, GFS\u00ae is affiliated with Fiduciary Plan Governance, LLC. and the Centre for Fiduciary Excellence (CEFEX) where he serves as an independent fiduciary consultant, and a CEFEX Analyst. Mark has a Masters in Philosophy from the University of Pennsylvania and is a former US Army Officer. His final active duty assignment was on the faculty of the United States Military Academy at West Point, NY where he taught Philosophy, Ethics & Critical Reasoning. He has nineteen years of financial services experience; fourteen as a financial advisor with broker-dealers, and five as an RIA. His expertise is in the area of fiduciary best practices, 401k hidden fees and ethical issues in the retirement plan marketplace. Mark also writes the 401k Ethicist column for the Journal of Compensation & Benefits and is listed among the 2013 Top 100 Most Influential People in the 401k Industry; some of his work can be found at www.PrudentChampion.com. Mark welcomes examples of ethical issues in the retirement plan space, and especially misleading 401k marketing materials at 401kEthicist@PrudentChampion.com","sameAs":["http:\/\/www.prudentchampion.com","http:\/\/www.linkedin.com\/in\/mensack","https:\/\/x.com\/PrudentChampion"],"url":"https:\/\/www.paladinregistry.com\/blog\/author\/mark-mensack\/"}]}},"_links":{"self":[{"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/posts\/1163"}],"collection":[{"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/comments?post=1163"}],"version-history":[{"count":17,"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/posts\/1163\/revisions"}],"predecessor-version":[{"id":2854,"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/posts\/1163\/revisions\/2854"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/media\/1167"}],"wp:attachment":[{"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/media?parent=1163"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/categories?post=1163"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/tags?post=1163"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}