Difficult and domineering committee members can disrupt meetings, kill morale, and risk litigation. So how are the diplomatically handled by 401k advisors in order to maintain effectiveness in keeping with the committee’s fiduciary responsibilities?
It was the focus of an early morning session Monday morning at the start of Wealth@Wor(k) 2021 (formerly Excel 401(k): The Advisors’ Conference, an in-person event in Nashville, Tenn.
Presented by CAPTRUST’s Jean Duffy and Erica Blomgren, the duo focused on three specific committee members commonly seen and offered concrete suggestions for augmenting behavior for the benefit of the group.
Duffy began by listing five best practices to proactively mitigate difficult situations, including:
- Establish strong governance through the charter, acknowledgment letters and documentation.
- Consider having legal counsel sit in on the meetings, but as a guest, not a member.
- Ensure members understand their committee roles.
- Document the meeting minutes (not “he said this” or “she said this,” instead what was decided).
- Routinely revisit governance policies.
- Be sure to train new committee members with a separate call, review recent meetings, so they are not starting blind.
Blomgren and Duffy then presented three case studies of difficult committee members, beginning with the overinvolved CEO or owner.
No. 1: A non-committee member wants to be involved
It’s difficult for a CEO or owner to separate business from fiduciary responsibilities, and therefore not a good idea to have them on the committee. Even if they are not on the committee but exert influence over its decisions, they are at that point a fiduciary. A strict structure to, and construction of, the committee is one way to address the issue.
“As we saw in the NYU fiduciary breach case, don’t use a committee to train the members on how to invest,” Duffy said before adding that if the meeting strays and non-fiduciary issues are discussed, it’s best to stop the meeting and begin a separate meeting.
“These types of issues are more up-market than down-market, but as we all know, they are increasingly coming down-market,” Duffy said.
No. 2: The overly influential committee member
To deal with the committee member that talks too much, is overly argumentative, or otherwise disruptive, Duffy emphasized that it’s important not to trash the person or their ideas. As the advisor, call on those who might not be as motivated to talk and consider giving equal time for each member to speak with strict time limits. If that doesn’t work, have a separate call or meeting with that person. If the behavior does not change, escalate it to the chairperson.
“Be sure to use ‘I’ versus ‘you’ statements,” Duffy explained. “It will avoid defensiveness on their part, but clear is kind, so be direct.”
No. 3: The absent committee member
While it’s rare that a committee member will miss more than two quarterly members in a row, it does happen. If so, revisit the committee charter with them, consider fiduciary acknowledgment letters, and have a process in place for communicating with a committee meeting that misses more than two meetings. Lastly, provide annual fiduciary training and remind members that the fiduciary role and position are of trust.
“Also, make sure you provide them with an electronic file of all relevant documents,” Duffy concluded. “They include the charter, fiduciary acknowledgment letters, the IPS, plan documents and amendments, a fee/expense policy statement, and the agendas for each of the four quarterly meetings.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
