Although there isn't a single, one-size-fits-all approach to good governance, there are steps you can take to help each client through the evaluation process.

Start by educating clients on the importance of good governance. For those who feel intimidated by the thought of documenting a process, explain that litigation is brought about by outcome—but is defended by process. And it's a lot harder for plan sponsors to defend the fact that they have a prudent process when that process isn't even documented.

Another advantage of good governance is simplified decision-making. Rather than discussing the same issues repeatedly with no decision-making process in place, good governance makes it easier to make effective decisions.  

Governance can also help with the issue of accidental fiduciaries—employees who inadvertently overstep the boundaries of their roles. Good governance processes help reduce risk by putting proper processes in place for both fiduciaries and non-fiduciaries. 

Once the client is on board with the need for a governance evaluation, start walking them through the process. A retirement plan governance white paper from The Principal, Retirement Plan Governance, What is it and why should you care?, will help.

The report offers four key questions to help plan sponsors define and strengthen retirement plan governance:

1. Are the right people involved?
2. Do these people know their roles and responsibilities?
3. Are there formal processes and procedures in place for carrying out assigned tasks?
4. Is there a process in place for monitoring the individuals who are performing plan-related functions?

Other governance resources available from The Principal are Good Governance: A Guide for Retirement Plan Sponsors and Starting the Conversation: The Financial Professional's Good Governance Guide.

Minimize your risks

Throughout any governance evaluation, keep these tips in mind to minimize your risks:

• Ask questions, but don't advise or make suggestions as to what or how governance processes should be structured.
• Gather facts. Don't make assumptions about what you think you know. Verify everything with the client.
• Remember that the governance structure is flexible.  Let your client there's no one right way to do something.
• Play the project manager role by pulling all the pieces together.
• Manage all the relationships involved in the process.
• Always suggest the client bring in their legal counsel to assist with the process.
• Follow up once the process is done to make sure they're doing what they're supposed to do.

Be among the first in the industry

Good governance is an often-overlooked issue—and one that few financial professionals are prepared to discuss. By educating yourself on this critically important process, you can demonstrate the depth of your expertise and carve out a potentially lucrative niche.