This video was recently shared at a conference of trustees and administrators and explains why plans subject to ERISA are now seeking independent evaluations of their investment consultants and OCIOs.
In just 5 minutes, it explains why trustees have difficulty determining if their advisers are adding value with all of the changes. The main reason is that "the player keeps score" and does not show the value-add of their asset allocation and manager changes. It shows step-by-step the why's and how's this is true.
In addition, it describes the OCIO fee trap ERISA plans face that can lead to a fiduciary breach. Because most OCIOs charge a % of AUM, an OCIO can be receiving higher and higher fees despite delivering a negative value-add.
Finally, given the increased lawsuits against benefit plans for poor selection, excessive fees and underperformance, an independent evaluation provides some legal protection by showing the trustees took proactive steps in due diligence and monitoring.
Kommentare