Hiring Friends & Family
Hiring Your Friends or Family as your Retirement Plan’s Financial Advisor is a Bad Idea
By Ary Rosenbaum, Esq.
They often say that it doesn’t matter what you know, it’s who you know. At one time or another, we have all derived a form of financial benefit because of someone we know. Maybe it’s a job and maybe it’s free Yankees tickets. It could be through someone we had previously worked with or through nepotism. Most of the time, “juicing people in” is harmless, but plan fiduciaries such as retirement plan sponsors could breach their fiduciary duty and/or commit a prohibited transaction by selecting plan providers just based on a previous relationship whether it’s familial or centered on friendship. This article is about why it’s wrong for plan sponsors to hire plan providers just based on the fact they know you, rather than what they know.