Transcribed from the recording and lightly corrected. It may contain errors; the recording is the record.
00:00Patrick Williams: There's a lot of people that are using the fiduciary word as a marketing term, but it really has very little backing it up.
00:10Chelsea Ryckis: You can't operate your business, you can't take commission, you can't take bonuses. I mean, you can, and you can disclose it, but ultimately it's inherently a conflict of interest. It's prohibited transactions all over the place.
00:20Patrick Williams: If you're managing a retirement plan, if you're managing a health plan, there's certain responsibilities that come with that, and part of that is being able to document your process.
00:31Chelsea Ryckis: RFP processes have been designed to protect incumbents and to deliver the exact same BS essentially every single year. The system has been working the way it's been working for as long as it's been working because somebody's making a lot of money, and it's generally not in the best interest of plan sponsors.
00:52Chelsea Ryckis: The Business of Benefits is your no BS, no sales guide to real solutions. No gimmicks, just the truth about how to take control, transform your benefits, and care for your most valuable asset, your people. If you're tired of the same old sales pitch and you're ready to rethink your benefits, this podcast is for you. The truth is out there. Are you ready to hear it?
01:13Chelsea Ryckis: Welcome to this week's episode of The Business of Benefits podcast. I'm your host, Chelsea Ryckis, and I have Patrick Williams here with me today, co-founder of Fiduciary in a Box. How are you, Patrick?
01:25Patrick Williams: I'm doing great. How are you doing, Chelsea? It's good to see you again.
01:29Chelsea Ryckis: Good to see you too. Are those your pups saying hi? My dog's name is Copious. We used to have Copious on our website as our "Chief Complaint Officer." Anyway, we've gotten a little too big for that to still be as cute as it used to be. But nonetheless, thank you so much for being here. You and I always have such fantastic conversations, and you've definitely been a trusted resource for me over the last few years in this industry. So I'm very honored and excited to have you on the show today.
02:01Patrick Williams: Well, thank you.
02:03Chelsea Ryckis: I've been getting a lot of inquiries around fiduciary process, people reaching out saying, 'hey, can you send me that episode you did on fiduciary duty,' or 'can you send me the one you did on ERISA lawsuits.' But as you and I both know, the lawsuit landscape is changing really quickly, so I think it's always good to have these conversations, maybe even quarterly if not biannually. So that's what we're going to do today, reset on what it means to be a fiduciary, the different tenets of fiduciary duty, settlor versus non-settlor, talk a little bit about some lawsuits, and then I really want to get into what you're seeing [unclear] in the compliance space. Does that all sound good to you?
02:45Patrick Williams: Sounds great.
02:46Chelsea Ryckis: All right, so can you update our listeners? And remember, our Business of Benefits listeners tend to be plan sponsors, mid- to large-market plan sponsors. So for them specifically, not brokers, not vendors, what does it mean to be a fiduciary, and what are those core tenets?
03:03Patrick Williams: Yeah, great question. So the core tenets really focus on an individual that's a fiduciary putting the interests of the plan participants first. And under ERISA, that means acting solely in their interest with decision-making, and paying only reasonable expenses. I know we're going to get into the conversation around reasonable expenses, but following the plan document where appropriate, and documenting your decisions. The key word here is prudence. ERISA doesn't require plan sponsors to master perfection. Prudence basically says, do you have a prudent process? They're not measuring the outcome, they want to look at what you implemented as a process, and what you documented along the way in making these decisions. So for fiduciaries, your first foot forward is acting in the best interest of the participants, and then following up with process.
04:20Chelsea Ryckis: Can you explain settlor versus non-settlor function?
04:24Patrick Williams: Yeah. So settlor functions are business decisions that an organization will make, this ties into what we were talking about before we launched, which is that plan design is a settlor function. Non-settlor, or fiduciary, functions deal with how the employer acts with regard to ERISA and liability, decisions about operating and administering an existing plan. The settlor function, plan design, doesn't carry fiduciary liability. What carries the liability is the fiduciary function. Some examples from the settlor side: establishing a new health plan or retirement plan, deciding whether to offer health insurance or a 401(k), selecting the type of plan, PPO, high-deductible, whatever, these are all non-fiduciary decisions. But when decisions start to involve things like establishing a committee, holding committee meetings, managing conflicts of interest, vendor oversight, those are all fiduciary functions employers need to be aware of and build into their process.
06:00Chelsea Ryckis: No, that makes perfect sense. What do you see as the biggest hurdle for plan sponsors in understanding that the same prudence they bring to their 401(k) is now, and has always been, required on health plans? Though we all know the CAA is really what shone the light and got everybody thinking about this. But what do you see as the biggest hurdle for plan sponsors in actually implementing this?
06:29Patrick Williams: Well, I think the first thing I see is that when the CAA passed, and we were having early conversations with employers about Fiduciary in a Box as a solution, we quickly realized we had to frame it around retirement first. We'd say, 'in your retirement plan, do you have a committee? Yes. Do you get together and hold meetings? Yes. Does someone document those meetings? Yes.' And then we'd explain, under the CAA, you now have to do the same thing with your health plan. You need to put together a committee, document those minutes, review your vendor relationships, review the contracts and fee arrangements, and get an understanding of what makes up your overall health plan, the true costs and the relationships behind all the vendors involved. It's been a process getting employers to move along. A lot of the advancement we've seen has come from Fortune 500 companies, but now that's pushing down, and we're starting to see a lot of organizations in that 500-to-5,000-employee range implementing these committees and structures, diving into their relationships, and really getting an arm around how their plans run and what costs are associated with them, and once they have that data, what proactive changes they can make that positively impact both their participants and the cost of the plan. It's not always about finding what's expensive and carving it out, sometimes there are other levers. So it's important for organizations to look at this broadly first, then narrow in on where they can actually have an impact, whether that's a point solution, a plan design change, or something else.
08:57Chelsea Ryckis: Yeah, and sometimes, I think you kind of alluded to this, in my experience it's not necessarily about adding or removing. A lot of the time it's simply strengthening the contract terms of existing vendors. We've seen immense success in that. I wanted to share a quick story. Back in 2016, 2017, I joined Donovan's company, J. Donovan Financial, as a partner. At the time he was running a registered investment advisory and doing a lot of retirement planning. He was gradually transitioning into employee benefits because one of his retirement clients asked him to take a look at their health plan too. He came in 12% under their current cost and beat out a large, publicly traded brokerage, and his reaction was, 'what is happening on this side of the industry?' So that's really the founding story of how Ethos got into health and welfare exclusively, just seeing the lack of fiduciary process.
09:58Chelsea Ryckis: And I remember when I joined, we had 'fiduciary broker', something, something, on our website. This was probably 2017, and we met with a vendor at the time, [name removed] with [company removed]. He's a big personality in the industry, but at the time we were nobody. He saw the word 'fiduciary' on our website and got so excited, said that's the future. That's what Donovan had been telling me, and at that point he was really the only other person who saw it. I'd taken dozens and dozens of vendor meetings, and very few people understood that early on just how big 'fiduciary' was going to become on this side of the business.
10:43Chelsea Ryckis: Which brings me to my next point, and I was going to ask you this later, but let's just get into it, because it's a bit of a controversial topic. Everybody and their mom thinks they're a fiduciary these days. We went from companies, and by companies I mean mostly brokerages and vendors, having no idea about any of this, to now everybody having some version of it, at least from a marketing standpoint. But walking the walk is different from talking the talk when it comes to fiduciary duty. So what are you seeing in the market, and what should plan sponsors look out for?
11:26Patrick Williams: There's a lot of people using the word 'fiduciary' as a marketing term, with very little actually backing it up, and we've seen that continue to grow and gain momentum. What I see happening in the marketplace is that there are some organizations, like yours, and others coming from the consulting side, that are genuinely embracing the fiduciary language and the process. You're immersed in it, you're not one of these overnight LinkedIn sensations. It's amazing, I honestly can't go on LinkedIn anymore because everyone's bragging about what they just did. That's never been my position. My position has always been: head down, do the work, and just get it done.
12:26Chelsea Ryckis: Yeah. How much work are you really doing if you have time to make three posts a day?
12:31Patrick Williams: Right, right. So some of what we're seeing is organizations like accounting and audit firms starting to dive into this too, because they already have client relationships, particularly on the retirement side, where a lot of accounting firms have TPAs managing retirement plans. Now, whether it's through HIPAA exposure or just recognizing the opportunity, they're introducing fiduciary consulting as a service. I gave a talk last week in Minneapolis to a room of consultants and TPAs, and I told them: one of you is going to step up and do this work, but the client is counting on someone to do it, the TPA has the next-closest relationship after the consultant. So either the consultant jumps in, or the TPA jumps in, but somebody has to take the reins, because clients now know enough to ask the question, and they're looking for someone to lead them down that path. And if you don't do it, you're going to lose the business.
14:07Chelsea Ryckis: Yeah. And here's what I find most fascinating about this conversation, this obviously isn't new. We've been developing our internal framework and process for well over a decade now. Our process is tried and true, we've made plenty of mistakes early on that we no longer make, but there's a whole wave of people suddenly doing this without that same learning curve, without the years of work it actually took to build a real framework and process, as opposed to just marketing language on a website or LinkedIn. Your business model needs to reflect a fiduciary standard of care. You can't run a fiduciary advising process for your clients while your own business model has inherent conflicts of interest built in. Taking lines of credit from carriers, I saw this two weeks ago, script-fill fees that shouldn't be baked in. Mistaking per-member-per-month, that was what was really in the contract, but the disclosure said per-employee-per-month. Little things like that. You can't take commissions or bonuses, well, you can, and you can disclose it, but it's still inherently a conflict of interest. There are prohibited-transaction issues all over the place. So the irony is, this isn't new, brokers specifically just haven't embraced it, and I think it's because doing so means exposing a business model that may not be aligned with the best interests of the people they claim to serve. My hope is that plan sponsors pushing advisors to help them understand this will force better business practices across the board. I'm not saying brokers are bad people, I know most of them are genuinely good, but the system has worked the way it's worked for as long as it has because somebody's making a lot of money, and it's generally not in the best interest of plan sponsors.
16:25Patrick Williams: Yeah. And I think the one thing we're leaving out of this equation is the plan sponsor. I look at it from the standpoint of whether plan sponsors are asking the right questions. I remember, back when I was in consulting, walking into an employer and saying, 'give me your plan for managing your healthcare costs over the next three years.' Usually I'd be sitting across from the CFO, and they'd look at me like, 'what are you talking about?'
17:00Chelsea Ryckis: What?
17:01Patrick Williams: That's really what I've built my business around. When we look at plan sponsors, they need to ask deeper questions to get to the right person to work with. If we could do a better job educating plan sponsors, literally giving them the questions they should be asking, I think that leads to better outcomes. Right now they're not asking the right questions. Someone says they're a fiduciary, and it's just a checkbox.
17:40Chelsea Ryckis: Yeah, right, versus actually looking at the language in the contract, and then, if they are a fiduciary, and really this applies to a TPA, a repricer, a PBM, do they also carry the insurance to back up that claim? There's a lot more that goes into it than just putting something on paper. That's an interesting point about RFPs, because I couldn't agree more, I think that's the fundamental problem. RFP processes have been designed to protect incumbents and to deliver essentially the same result every single year, and it really favors large, publicly traded brokerages for their market leverage, which means something completely different than what plan sponsors actually want it to mean. But I digress. We've been sending sample RFP questions to groups we know are running an RFP, reaching out proactively and saying, 'here are five additional questions to consider.' Every single time, they've taken them and added them, and it's exactly what we're talking about: Are you willing to give us a contract ahead of time? What's your capacity for fiduciary status? Do you only work with vendors that are fiduciaries themselves? What's your procurement process? Will you put fees at risk? What does a true multi-year strategy look like? What does the data analytics look like? Questions that actually yield better outcomes. The most recent one we won, the prospect put the RFP together after listening to our podcast episode with Mark Cuban, everything in it was about fiduciary standard of care and fiduciary advising. They looked at our contract before engaging with us, and checked out all of our insurance, including our fiduciary insurance. It was incredible. So I think you're right, we have to educate and offer this material up front, otherwise plan sponsors just don't know.
19:46Patrick Williams: Yeah, one of the things I'd introduce in a positioning conversation with a plan sponsor today, if I were still in the consulting role, is this: Mr. or Ms. Plan Sponsor, when you put together a committee, whether for your retirement plan or your health and welfare plan, one of the insurances you acquire is fiduciary liability coverage. But did you know that the advisor you're working with on your health and welfare consulting typically doesn't carry fiduciary liability insurance? They carry a completely separate type of coverage that doesn't even protect them in the event of an ERISA claim. And that's a really big deal, you have someone brokering insurance who isn't protected under an ERISA claim themselves, and that's a problem.
20:43Chelsea Ryckis: Yeah, I couldn't agree more. So what do you see as the 'aha' moment in your experience, plan sponsors really understanding this?
20:57Patrick Williams: I think the aha moment comes a couple of different ways. First, a lot of organizations that use our platform say, 'wow, this is in-depth.' Second, they say, 'we thought we were organized, but we're finding we have more gaps than we thought.' With Fiduciary in a Box, the whole idea is helping you document your process, identify the gaps, and close them before they turn into a hair-on-fire situation in the event of a DOL audit. So the biggest feedback we get from employers is: this is in-depth, we're glad we did it, and we thought we were organized but weren't quite as organized as we thought, because this information lives everywhere, until it lives in one place inside Fiduciary in a Box.
22:05Chelsea Ryckis: Well, I had a conversation with a prospective HR contact today, and we were talking about fiduciary obligations, process, and due diligence. She said, 'I'm the only person in my organization who knows why we made the decisions we made at renewal last year, and none of it is documented anywhere.' And this is a fairly large organization, 10,000-plus employees. If she left tomorrow, literally nobody would know why any decisions were made for the last five years.
22:41Patrick Williams: Yeah, I agree. I think Fiduciary in a Box lets you move those decisions out of someone's head and into the platform, with the ability to recite that story down the road if someone comes to challenge it. That's the issue, people move from one organization to another, consultants change, and the plan sponsor is left holding the basket, trying to figure out how it all fits together. Fiduciary in a Box weaves that story for you.
23:19Chelsea Ryckis: What I like most about Fiduciary in a Box, and your software in general, is that it doesn't matter whether you're brand-new, on the plan sponsor or the vendor side, to understanding fiduciary due diligence, process, and responsibility, or whether, like Ethos, you've been operating under your own fiduciary framework for over a decade. We still found value in organizing and documenting our process. If you don't have software or a process, this is a really easy way to get that process right, and to at least check the box: if we're audited, we have our contracts loaded, we've shown process, good job. But the real difference, where you can get the most out of it, is figuring out what's actionable. From everything you uncover in your contracts, your data, and your trends, what can you actually do now to impact cost and health outcomes? That's where a strategic advisor, whether it's the broker managing your health plan or a consultant you bring in, really earns their value. But without your ABCs in place first, you're never going to get there. So I think it's awesome to be able to have both.
24:56Patrick Williams: Yeah, you have to build the foundation for the plan sponsor first. They have to know what they have before they can have any real sight line down the road. And as the consultant helping them build that platform, it gives you the tools to say, 'okay, here's where we're at right now, and here's the path we want to take,' you can create the vision for them and help them take corrective steps toward that goal. Your organization, with the material you've built outside of Fiduciary in a Box, your scoring and your KPIs, those live within the plan strategy and solution side of Fiduciary in a Box. But taking that and really applying it, with real accountability to the client, is great work to see.
26:04Chelsea Ryckis: Thank you, I really appreciate that. So, kind of a fun one, what do you think would make compliance more engaging, more fun, and really move us from a check-the-box mentality to actually doing something impactful and meaningful with everything we're uncovering in these audits?
26:23Patrick Williams: That's a great question. We try to make it fun, we've built in some gamification around completing different sections and tracking percentage of completion. We've also got some new materials coming that will really help from a consulting standpoint, working with clients toward completing the fiduciary process, which of course starts over again the following year. But I'll leak a bit of what we've completed and are about to launch: a quarterly fiduciary assessment. It reviews all the documents in the system, what's been done and what's still outstanding, and checks whether it's the right document in the right place, like whether it's actually the Summary Plan Description versus the SBC. It also looks at governance, the charter, committee members, and compiles all of that. Basically, it grades your client on where they stand and then builds a 30-, 60-, and 90-day completion calendar you can share with the client, and even delegate pieces of, since some of the material they'll need to provide themselves. It really moves them toward completing the fiduciary process and hitting that score everybody's aiming for.
28:42Chelsea Ryckis: I love that, that's really neat, sounds like it'll be a lot of fun. If you could ban one phrase from our industry, what would it be?
28:54Patrick Williams: It's kind of a tie, between 'I don't know' and 'we've always done it this way.'
29:06Chelsea Ryckis: 'I don't know' as in, not that they genuinely don't know the answer, but that's just their go-to response?
29:11Patrick Williams: Right, if I ask, 'how did you decide to work with this specific PBM?' and the answer is 'I don't know'
29:21Chelsea Ryckis: No, yeah, we have a 120-page questionnaire that goes up. Somebody on my team better know.
29:29Patrick Williams: That's completely non-defensible. I can picture that organization being investigated by the Department of Labor, and the plan sponsor and fiduciary's response is 'I don't know.' That's not a good answer, and it's not a good way to start that meeting.
29:50Chelsea Ryckis: No. Do you have any crazy stories, conflicts of interest, plan sponsors doing things the same way forever, any wild stories to share?
30:03Patrick Williams: Yeah, I've run into a couple of situations that really speak to what's happening in our marketplace, again, the transient nature of people in these roles. We have a client right now that hasn't filed a Form 5500 in seven years.
30:25Chelsea Ryckis: Oh my gosh, those penalties are steep.
30:28Patrick Williams: They're really steep.
30:30Chelsea Ryckis: That sucks.
30:31Patrick Williams: Yeah. And that's the second client I'm aware of in that position, we've got another that hadn't filed one in five years. There was another situation, I did a demo for a fairly large customer, about 3,000 lives, and at the time they decided to put it on the table and not move forward. I said okay, and figured I'd follow up. I didn't need to, six months later they called and said they'd just gotten a letter from the DOL for an audit, and asked if we could help get their information loaded into the system. We said yes, got everything populated as best as possible, and then gave the auditor the ability to log in, review the system, and evaluate the documentation directly. Up to this point, I haven't heard of any fine associated with that client yet, so, cross your fingers.
31:45Chelsea Ryckis: Yeah, I know. It's definitely one of those things people assume is just hearsay, or a story about somebody else, but it's real.
31:53Patrick Williams: Yeah. I think what's really concerning is that people, whether they realize it or not, if you're managing a retirement plan or a health plan, certain responsibilities come with that, including being able to document your process. That should be clear to everybody. Whether you're using a yellow pad or a formal checklist, I don't care, but you need to document your process. And in the event of an audit, that's what you're counting on as your defense. My only question is: are you going to put all your weight on a checklist, a notepad, some scattered notes in a system, or even your broker's word?
32:46Chelsea Ryckis: Right, like, 'our broker told us this was the best option.' You can't delegate that. You really can't.
32:53Patrick Williams: You can't.
32:54Chelsea Ryckis: So, a couple of tangible takeaways for listeners, and then we'll start wrapping up. If you don't have something like Fiduciary in a Box, and/or an advisor with a really solid framework, hopefully both, here are a few things you can do in terms of documenting your process. First, run a solid RFP that includes some of the questions we mentioned earlier, and ask to see contracts ahead of time, so you don't get to the finalist stage only to find both options are full of gaps, and now you've made the worst possible decision. Look at contracts before you even engage. Ask about conflicts of interest, how they're compensated, their stance on fiduciary status and committee governance, how they ensure compliance across the board, and what their due-diligence process looks like when they bring you vendors, for example, if your consultant runs a TPA RFP on your behalf, what does their due diligence actually look like? Because ultimately it's your due diligence at the end of the day. Second, use a scorecard, not just for vendor selection, but for every finalist meeting in an RFP process, so it's consistent, and you can carry that into kickoff, open enrollment, logistics, contributions, plan design, and every decision that follows. Third, create a fiduciary summary. We include this in our post-enrollment materials, it's literally spelled out: these are the exact decisions that were made, these are all the markets we went to, this is why the company chose what it chose. We take all the information from the entire renewal process, build that summary, send it to the plan sponsor to sign off on, and it goes into Fiduciary in a Box. Fourth, once you have vendors in place, do ongoing vendor monitoring, at least monthly, or quarterly at minimum, sending a scorecard to the plan sponsor and the account management team. Everyone ranks the vendors: are they holding up their performance guarantees, how are their service level agreements, are they responding on time, what's their data access like, are they meeting the fiduciary capacity they told you they would? And then hold your fiduciary committee meetings. Those are some easy takeaways to start implementing if you don't already have anything like this in place.
35:34Patrick Williams: Yeah, I love it. I've known about your scoring and your KPI approach with vendors for a while, and I just wish everyone practicing in this space held themselves to that same standard. I'm genuinely admired by what you guys have built, and I want you to keep pushing the envelope. When I'm out speaking and get asked about organizations using our platform well, you're the first one I point to, a lot of people have already heard of you. But if you want to model somebody, go look at what Ethos Benefits is doing.
36:21Chelsea Ryckis: That's awesome, thank you so much. Your platform makes it a lot easier than it used to be for us, I'll tell you that. Organizing all of that used to feel like a little spider web, now it's clean, organized, and easy. So thank you for that. What would be your takeaway, the last thing you'd say to plan sponsors listening today?
36:42Patrick Williams: I think, take the time to digest what's been said, and take an honest look at your current situation. Have you established a committee? What have you actually done? If you haven't done anything and you're just operating renewal to renewal, that's not the right path, this has to be actively managed. It's so much more than a pre-renewal meeting, a renewal meeting, and enrollment. Employers need to get more active and lean into this. And if you're not working with the right person, or you have questions, give Chelsea a call.
37:29Chelsea Ryckis: Thanks. And, we didn't talk about this much, but the takeaway materials in Fiduciary in a Box just keep getting better and better. That's often material I send out to prospects who reach out, or who've listened to podcasts like this one. So if you're listening and want to see a sample of the materials you'd get access to with something like Fiduciary in a Box, reach out and I'll send that over. But Patrick, thank you so much for being here today. Where can our listeners find you?
38:06Patrick Williams: We're on the web at fiduciaryinabox.com, you can go there and schedule a demo, or just pick up the phone and give us a call. We'd love to hear from you.
38:21Chelsea Ryckis: Awesome, thank you so much for being here today. And to our listeners, don't forget to like, share, and subscribe. We'll see you next time on The Business of Benefits.
38:30Patrick Williams: Thanks, Chelsea.
