Education versus Advice

It’s important to differentiate between employee education and employee advice.  Investment education includes general information about the benefits of plan participation and general investment information related to investment concepts such as diversification, dollar cost averaging and risk tolerance. 

On a general level, an education program does not provide participants with specific recommendations on how to allocate the investments within their retirement plan, nor does education seek to provide individual or tailored advice in any way.  The intent of an education program is to provide participants with the tools and information necessary to help them understand the options available under their plan and to help them make reasonable investment decisions on their own.  Simply offering education to participants does not constitute a fiduciary obligation to the advisor.  If the advisor isn’t taking on this obligation of your company’s retirement plan, then that responsibility falls on you.

 Offering participant advice, however, involves the advisor gathering personal information from participants as a means to advise the participants on a particular course of action with respect to their retirement plan account, based on their personal needs or goals.  In this arrangement, the advisor is acting in a fiduciary capacity and is subject to the applicable fiduciary responsibilities under ERISA, as discussed above.