Article Originally Published: TheStreet
Who should decide whether retirement plans can include private investments like private equity, credit, hedge funds or direct real estate — and how should they be evaluated? In this episode we break down the DOL’s proposed rule, what makes alternatives different (costs, opacity, liquidity, valuation and risk), and why ERISA fiduciaries face special legal challenges when considering these options for DC plans. Learn what plan sponsors should document, how advisors should respond to marketing pressure, and what participants can do if they want to avoid alternatives in their lineup.
Jeffrey Snyder, Broadcast Retirement Network
Knut, it’s so great to see you. Thanks for joining us in the program this morning. Great to be here, I appreciate it.
Yeah, and I don’t wanna out you, but I’m gonna out myself. I’m a retirement nerd. I love ERISA.
I love all the things we do in our industry because we’re trying to help other people. But you are part of the Institute for the Fiduciary Standard. I wonder, before we get into alternatives and defined contribution plans, can you tell us a little bit about the Institute, what it stands for, what you do?
Knut A. Rostad, The Institute for the Fiduciary Standard
Absolutely. We are completing our 15th year, and we were formed because a group of advisors believed that there should be an entity, a legal entity that exists for no other reason than to further advocacy and education around what it means to be a fiduciary. And that’s what we’ve tried to do for the last 15 years.
And so we are a single issue group, and this is the only issue that we engage in. So suffice to say you love ERISA then. It is fantastic, yes.
And in that line, one of our board members is Phyllis Borzy, who of course lived ERISA for her whole professional career. And I’m honored that she’s been willing to join our board and help with our efforts.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, well, very important. I wanna segue, the Department of Labor recently issued a proposed rule. And I think that the press maybe got it a little bit wrong.
I’m not a media guy, but I mean, they really framed it around alternative investments. But it really was to establish a better process, I think to select overall investments in the retirement plan. Let’s start with that.
Knut A. Rostad, The Institute for the Fiduciary Standard
I think what you say is, I’ll say it’s technically correct, but I’ll say that spiritually, I don’t think it’s correct at all because their reason for the rule as introduced a year ago by the executive order from the President of the United States was to make it easier for plan sponsors to recommend alternative investments. Anyway, so that’s how I’m viewing it. I think that’s how a lot of people in the ERISA world are also viewing it.
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