Are You Hiding Behind Your Consultant?

February 18, 2014

A qualified and objective consultant can be a great resource for plan fiduciaries in the prudent management of governmental, corporate, and non-profit pension programs.  However, the important thing to consider in all consulting relationships is that the consultant is a resource, and not a shield.

A “Shield” or a “Resource”?

As a plan fiduciary, you are charged with making decisions in the “best interests of plan participants and beneficiaries.”  No matter how many consultants you hire, you are still the fiduciary, and no multitude of consultants is going to relieve you of the serious responsibility to carry out your duties in the most prudent manner possible.

The use of a consultant can create a false sense of security, particularly in the governmental sector where there can be a tendency to use the consultant as a “shield” rather than a resource.  If you are blindly following the advice of your consultant, without considering other sources of advice and input, then you are putting yourself at risk of only considering one source of professional guidance when making key decisions.  Qualified consultants can be a valuable resource, but hiding behind their advice is not going to protect you from the risks of making ill-advised decisions.  To the contrary, a plan fiduciary must be diligent to ensure that the advice they receive from their consultant is relevant and not, in itself, a conflict of interest (see Article Number One: Does Your Consultant Have a Conflict?).

A fiduciary should seek input and advice from a number of qualified sources.  The fiduciary that seeks out advice from multiple parties to fulfill their duties is likely going to make more informed decisions than a fiduciary that blindly follows the advice of a single consultant.

Contrary Advice Can Be A Very Good Thing

 Seeking out a second, third, or fourth opinion on anything can be a good practice.  Whether it is your personal health, an investment decision, or management of a pension plan, seeking out other opinions is good behavior.

If you employ just one consultant for your pension plan, it is wise to purposely seek contrary viewpoints on important topics before making big decisions.  If you are making a major decision on your pension program, you should seek out other opinions even if the advice of your consultant makes sense.  Many times, the advice of a qualified consultant will result in the right decision being made.  However if you don’t seek out alternative viewpoints, it is too easy to be on “consultant autopilot”, and therein lies a big problem for many governmental plan sponsors.

 Other key points to consider:

  •  If you don’t understand what your consultant is advising you to do, ask more questions.  If you still don’t understand, don’t take action until you do.  At the end of the day, you are accountable for the decisions and if you end up defending your actions in court, ignorance of the facts is not an excuse for failing to conduct fiduciary duties appropriately. 
  • Ask other plan sponsors their opinion on key matters.  If someone that is similarly situated to your circumstances made a different decision, ask them why.  Document your discussion and share it with your other fiduciaries, even if you don’t agree with it.
  •  A good consultant will give you options, since good plan governance does not always have absolute answers.  If you aren’t being presented with options to key issues, ask why.
  •  If your consultant makes the same recommendations (on plan design, investment structure, vendors) on other plans as yours, you should be certain you aren’t just getting “cookie cutter” advice that is pre-packaged, no matter who the client is.


Finally, you don’t have to always say “yes” to consultant recommendations to show that you are doing your job as a fiduciary.  Sometimes it may be prudent to say no.  There’s a difference between using consultants for advice and education vs. rubber-stamping all of their recommendations, and then hoping for the best.

 Gregory Seller Consulting, LLC.  All rights reserved.  May not be reprinted in whole or in part without written permission.