Financial expert turned professional writer Susan Mangiero has a new article out on the issue of adding alternative investments to 401(k) plans. It provides an excellent summary of the issues and is particularly helpful if you are new to the topic – it will get you up to speed quickly.

I make a guest appearance in the article, cautioning advisors to plan sponsors and fiduciaries to step carefully. As the article explains, “Attorney Stephen Rosenberg, an experienced litigator and partner with The Wagner Law Group, reminds advisors [to plans] of their responsibilities to avoid undue risk, stating, ‘Access whatever expertise is necessary to make an informed recommendation to your clients.'”

Sometimes, in some forums, I can sound a little more strident about whether the movement to add alternative investments to plans is safe for plan sponsors and fiduciaries than I do in this article. It isn’t so much that I am interested in being some sort of a Cassandra about the movement to add these asset classes into plans, but more that I am concerned about the complications and risks for those who sponsor such plans and for those who accept the potential liability of serving as fiduciary for such a plan.

To date, despite my raising the question often, no one appears to have proffered a study or data clearly demonstrating that adding alternative assets into plans will increase participant returns without disproportionately increasing the volatility and risk faced by participants as market investors. Particularly in the absence of broadly accepted proof to this effect, plan sponsors and fiduciaries court possible breach of fiduciary duty suits by adding alternative investments to their plans.

For large plans that want to add such assets, my view is more power to them. If they want to do it, go for it. I still think that on the current evidence it’s the wrong move and that they are inviting litigation, particularly because the size of their plans will make them a tempting target for the class action bar. But they are big boys with the insurance, legal teams and deep pockets to invite that brawl into their parlors if so inclined.

But for most other plan sponsors and fiduciaries, they will be putting themselves at risk without necessarily having all the resources at their disposal needed to confront litigation over the question of whether such assets belong in their plans. And for them I still say follow these steps before even deciding to allow alternative assets to be part of the investment menu. Doing so will make them less of a target for roving bands of plaintiffs’ lawyers looking for targets to sue if adding the asset class turns out to be the wrong move, and if sued, will give them the high ground to fight from.