A key axiom is that even if something is not illegal it still might not be good.
All things are lawful but not all things are beneficial, helpful or profitable; All things are permissible but not all things are constructive, build up, or edify. No one should seek their own good or their own advantage, but the good of others, the good of their neighbor, that is, the other’s well-being.
In medicine they have the Hippocratic Oath. In the world of retirement plans we have the weight of ERISA that bears upon us the responsibility to always do what is in the best interest of the employees.
While ERISA addresses a great many facets of employee benefits, there are still spaces and gaps that are open for interpretation, and a great many of these voids occupy some gray area. The Department of Labor, the IRS and a great many ERISA practitioners would argue that it need not be gray at all, however, if we simply hold to the foundational tenet of employee benefits:
If it is not to the benefit of the employees it is not an employee benefit. If it is not in the best interest of the participants it should not be done. Unless the majority of participants benefit it could pose a conflict of interest. And if it feels like, looks like, or smells like a conflict of interest it probably is.
The question is whether financial advisors can fully serve both the trustees of a group retirement plan as well as the plan participants, whether they can make clients of both, or whether it poses a conflict of interest or a prohibitive transaction to serve in a fiduciary role in both the Board Room with the trustees of the retirement plan as well as in the Break Room with the plan participants. Are there inherent conflicts of interest with the common practice of “cross-selling” to plan participants, turning employee education meetings into sales meetings for the proffering of insurance products, annuities and other ancillary business? And if it poses a conflict of interest does it increase the liability of the plan sponsor, exacerbating the fiduciary burden of the employer who allows this practice?
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