When The Fiduciary Warranty is Dangerous

I don’t pull any punches, so I have certainly written many articles about plan providers issuing something called a fiduciary warranty, that is free and doesn’t protect the plan sponsor from almost any liability because plan sponsor never get sued for what the warranty is supposed to protect plan sponsors from.


While a fiduciary warranty is just a marketing gimmick, I never thought it was dangerous. I always saw it as a marking throwaway. I recently received information from my client regarding a plan provider touting their fiduciary warranty that I find to be absolutely dangerous. The materials and the email from the plan provider make it seem that a fiduciary warranty can be used as a replacement for a plan sponsor using an ERISA §3(21) or §3(38) fiduciary. A fiduciary warranty “protects” a plan sponsor from liability when dealing with the broad range investment requirement for plan investments. To quote Montgomery Scott from Star Trek III: “a money and two trainees” can meet that requirement. The same goes with selecting the QDIA fund as well.  That’s far different from what a §3(21) or §3(38) fiduciary does in limiting the plan sponsor’s liability with investment selections, fiduciary process, and participant investment education. A fiduciary warranty is worthless as opposed to hiring a financial advisor, which is what a plan sponsor needs. I find it reckless that any plan provider would suggest that a fiduciary warranty can replace the effectives of a financial advisor.


A fiduciary warranty is worthless, but harmless on its own. However, it is marketed and used as some alternative to hiring a good financial advisor, it is misleading and fraudulent advertising.

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