At this point, most everyone (including us) has commented ad nauseam on the impacts and issues of the new fiduciary rules on brokers and advisors in the handling of corporate retirement plans.

Worth readers are certainly aware of those rules. Many are owners or heads of companies which themselves may be the named fiduciary for a plan (alternately, the named fiduciary could also be an entire board of directors). Some of these individuals may be relying on their human resources team to handle compliance with the new fiduciary rules. But that reliance may be risky. The reason: A key deadline in the fiduciary rules is April 10, 2017, which is the final day that a plan fiduciary must have in place the processes and protocols for how the plan will be handled going forward.

What we have discovered when speaking with human resources professionals and corporate executives is that many are still questioning what to do, and almost everyone is still getting advice from self-serving sources. We believe that the senior decision-makers and/or owners of firms need to become proactive and directly involved. And this is not a task to be delegated lightly, as the consequences of a misstep can be substantial.

Consider, for instance, that the concerns of the plan sponsor and service provider acting in a fiduciary capacity are disclosure, responsibility and process. And here we are addressing the investment process itself, rather than any “conflicts of interest” regarding who represents whom, how a broker/advisor is compensated and whether brokers/advisors may or may not assume a nondiscretionary or discretionary fiduciary role.

It is our belief that investment decisions should be made by decision-makers and not necessarily implementers or overseers.

The Tibble International v. Edison decision last May, where the Supreme Court ruled unanimously that fiduciaries are dutifully obligated to monitor and adjust investments in the best interest of their clients, was not just about having the lowest-fee share class available. It also brought to light how the plan sponsor in that case arrived at the decision to place a mutual fund in the investment lineup. We believe this was the game-changer in the industry; the greatest fiduciary exposure to the plan sponsor lies in having a defined and defensible investment process.

Many brokerage, mutual and advisory firms will sell a proprietary product. They will justify that fund by showing you a Morning- star report or fund fact sheet. In our minds, that doesn’t cut it. Those documents are an opinion or a self-serving opinion, but not a process adopted by the plan.

What are the key components or guidelines of a rational investment process? In straight-forward terms, you need to think of that process as constituting three components: selection, monitoring and replacement guidelines. Those components, in turn, will include an overarching set of evaluation criteria over a rational time frame or review period.

Top quartile returns, on a risk-adjusted basis and over a series of time periods, may be part of the selection process, while performance metrics that are below median risk-adjusted performance, for a shorter period, may be a trigger for replacement.

A consistent process applied to all fund selections will help a plan sponsor meet the criteria laid down by Tibble. This process will allow the sponsor to meet the new guidelines of fiduciary responsibility.

It is our belief that investment decisions should be made by decision-makers and not necessarily implementers or overseers. This need for direct oversight is compounded by the fact that a new cottage industry has opened up for ERISA litigation attorneys to sue smaller and mid-sized companies and plans, including the senior executives who are responsible for managing them.

The potential financial risks to a company are great, and the owners/executives need to be actively involved, not only in the establishment, but the execution of these decisions.

This article was originally published in the December 2016/January 2017 issue of Worth.