Part 4: The recommendation should be a primary basis for investment decisions

This one seems like a no brainer.  Who hires an investment advisor only to not follow their recommendations?  We have seen this happen where a plan sponsor is just looking for validation of their prior thoughts on the marketplace.  Since the retirement plan advisor is providing advice on much more than just investments (think plan design, vendor compatibility, product structure, etc.), they are typically meeting this requirement of the five part test and exceeding it in other areas.

We can’t think of too many scenarios where an advisors recommendations don’t serve as the primary basis for decisions but in the case of outsourced ERISA 3(21) or ERISA 3(38) investment managers that are not the advisor, this could still be the case.  The advisor could say they have simply provided a list of options and it was the plan sponsor who made the decisions.  If it wasn’t even the advisor who formulated the options (think Morningstar, Mesirow, etc.), then the advisor could avoid becoming a fiduciary.