Why Relying on Non-Fiduciaries Creates Risk — Even When Everyone Is Acting in Good Faith
Why Relying on Non-Fiduciaries Creates Risk — Even When Everyone Is Acting in Good Faith
Many plan sponsors are surprised to learn that the professionals they rely on most heavily — brokers, consultants, and other service providers — are often not fiduciaries.
This isn’t a critique of those professionals. In most cases, they are knowledgeable, experienced, and acting with good intentions.
The risk lies elsewhere: plan sponsors remain fiduciaries even when the people guiding their decisions are not.
The Assumption That Gets Sponsors Into Trouble
A common belief among plan sponsors is:
“If we’re working closely with a broker or consultant, responsibility is shared.”
Legally, that assumption is incorrect.
Under ERISA, fiduciary responsibility is tied to plan sponsorship and decision-making authority — not to who provides advice or recommendations. Sponsors retain responsibility for outcomes and process, regardless of who influenced the decision.
Why Many Advisors and Brokers Are Not Fiduciaries
Most benefit brokers and consultants are structured to avoid fiduciary status because:
They do not have final decision-making authority
They do not control plan assets
They are often compensated through commissions or incentives
Their contracts explicitly disclaim fiduciary responsibility
This structure is long-standing and legal. But it creates a clear line:
Advice can be delegated. Responsibility cannot.
Where the Fiduciary “Gap” Appears
The fiduciary gap shows up when:
Sponsors rely heavily on recommendations without independent validation
Vendor options are limited or framed by non-fiduciaries
Fees and compensation structures are not fully understood
Decisions are renewed based on familiarity rather than documented review
When everything appears to be working, these gaps go unnoticed.
When scrutiny arises, they become the focal point.
Why Good Intentions Don’t Reduce Exposure
Most fiduciary failures are not driven by misconduct.
They are driven by:
Informal processes
Verbal updates instead of documentation
Assumptions about roles and responsibilities
Courts and regulators do not evaluate intent.
They evaluate process, impartiality, and evidence.Why This Matters More Now Than It Did Before
Fiduciary expectations are rising due to:
Increased fee and compensation transparency
Greater scrutiny of vendor relationships
Litigation trends that focus on process, not intent
Legislation from the DOL
This is the same progression retirement plans experienced years ago — before fiduciary standards tightened permanently.
Health and welfare plans are now entering that same phase.
How Increased Transparency Is Raising Expectations
Regulatory and litigation trends are changing what sponsors are expected to know and document, including:
How service providers are compensated
Whether conflicts of interest exist
How alternatives were evaluated
Why a particular vendor was selected or retained
As transparency increases, reliance on non-fiduciaries without oversight becomes harder to defend.
What Prudent Plan Sponsors Are Doing Differently
Sponsors who understand this risk are taking proactive steps to:
Separate advice from decision-making
Validate recommendations with independent review
Benchmark fees and services regularly
Document how conflicts were identified and managed
These actions don’t undermine advisor relationships.
They strengthen them by adding clarity and accountability.
The Bottom Line for Plan Sponsors
The issue isn’t whether your broker or consultant is doing a good job.
The issue is whether you can demonstrate a prudent, impartial process — independent of who advised you.
Plan sponsors don’t need to eliminate reliance on experts.
They need to own the fiduciary framework that surrounds that reliance.
Other articles that may interest you:
What It Means to Be a Fiduciary — and Why It Matters More Than Most Plan Sponsors Realize
Broker Compensation and Fiduciary Risk: What Plan Sponsors Need to Understand Now
📩 Ready for an independent evaluation that goes beyond fees? Let’s talk.
