What is an Independent Pension Fiduciary?

By MARK FOLGMANN

The last 16 articles I’ve written were to educate the marketplace about some of the problems you face when you deal with the financial service industry. Today I would like to share what we do at Ark Advisors LLC and why we act as Independent Pension Fiduciary's for 401(k)s.

Our main objective is to protect and safeguard the retirement incomes of employees while improving overall retirement outcomes. We find that most employers do not have a very good way to evaluate and monitor the success of their plan. We are hired directly by the 401(k) therefore our loyalty is to the plan participants and this eliminates conflicts of interest. We accept fiduciary responsibility in writing therefore releasing the small business owner of many risks involved within the plan.

We also find that we must set reasonable expectations with the business owners that oversee the plans because we do not believe most people can increase their retirement income by thousands of dollars per month - but we do believe the average employee can increase their retirement income by $500-$700 per month by utilizing an Independent Fiduciary.

This may not sound like a tremendous amount of money but to a 78 year old trying to pay his heat bill or a retiree attempting to buy medicine for his ailing wife of 40 years; it’s a significant amount of money. This is why employers can’t become complacent by implementing a 401(k) and forgetting about it. It is not a financial product to be bought and sold but a delicate income producing system that has the ability to under girth the American economy for the next 25-40 years.

It’s critical that employers meet your employees halfway to assure success. Once you understand how important this issue is, you will start to ask yourselves some critical questions.

Is our retirement plan good enough so that when our employees retire they will have enough money to come back and purchase goods and services from us? Once we begin to understand the depth of this question we will start to understand the intended role of the Independent Fiduciary.

In most cases it’s my job to get the small business owner out of the retirement plan business so they can focus on running their business. At that point I can then implement a proven fiduciary process that will increase the overall probability for success within the plan.

This process is based on expectations, insurance is based on guarantees but everything in finance is based on expectations. Therefore, part of our process is to match plan cash flows with expected portfolio returns so that we can set expectations regarding retirement income. By combining these expectations with the lowest cost solutions, we can consistently improve retirement outcomes for the employees.

With proper fiduciary oversight, the 401(k)s in America will live up to their expectations and without oversight they are doomed to failure.

Mark Folgmann is president of Ark Advisors LLC in Traverse City. He has more than 25 years of experience within the financial service industry. To learn more about the plan review process discussed here, contact Folgmann at (231) 668-4118 or mark@arkadvisor.com.