When I was a university professor and gave written homework, I frequently found myself in the position of having to remind students that reliance on a spell checker may not always produce good results. “I through the ball” is grammatically incorrect but would not reveal itself as an error. Someone would have to know that “threw” is the appropriate choice. Inevitably, a few individuals would counter that they plan to employ staff to write memos, carry out financial analyses and undertake research. I would then ask how one can adequately evaluate a potential hire, let alone review the quality of that person’s work (if hired) if he or she is lacking sufficient knowledge to recruit and oversee thereafter.

Outside the classroom, selecting and monitoring is no less important, whether it’s an investment security or a service provider. During a recent workshop I was invited to lead about service provider due diligence and the U.S. Department of Labor (“DOL”) Fiduciary Rule, I shared a matrix I created with other investment industry professionals. It showcases some of the many qualitative and quantitative elements that could be used as part of a selection and monitoring endeavor. Big picture categories include, but are not limited to, the following: Client Capabilities, Compliance, Credit Worthiness, Funding Sources and Operational Integrity. See slide 24 of the presentation entitled “Fiduciary Considerations” by Dr. Susan Mangiero.

With its early April 2016 debut, it’s too early to tell how the DOL’s new mandate will influence hiring and subsequent performance reviews. Attorneys emphasize that the bar is set higher than before so it will be important to track how Requests for Proposals (“RFPs”) and vendor interviews proceed. Firms seeking to use a “Hire Me” exemption to avoid being tagged as a fiduciary may not be able to provide sufficiently granular and plan-specific information to ERISA buyers in order for those fiduciaries to carry out their duties. When this question arose during an April compliance conference I attended, several of the presenting attorneys acknowledged that there could be an information gap, adding that buyers and sellers would have to figure out a mutually beneficial path forward. I will defer to the legal professionals to address this issue.

As an aside, the “Fiduciary Considerations” slide deck prepared by Dr. Susan Mangiero includes material produced by others. Efforts were made to attribute the original source. Those seeking to use any or all of this slide deck need to contact the copyright owners of each slide.