Five Qualifications to Evaluate When Selecting a Plan Consultant

Previously, we’ve discussed when a plan sponsor may seek the guidance of a retirement plan consultant and what services consultants can offer. When you’ve decided to seek assistance from a consultant, the next focus should be finding an appropriate consultant that can provide the specific services you need. The search for a retirement plan consultant shouldn’t be rushed. There are thousands of consultants and many offer unique or varying levels of service. These guidelines are designed to help clarify the process and what to look for when selecting a plan consultant.

Generally speaking, there are a few preferable characteristics that should be evaluated when seeking out a retirement plan consultant. Ultimately, the decision will be unique for each plan sponsor based on your individual preferences and needs. While there is no correct single set of RFP questions or ranking of responses, it is necessary for you to have your organization’s benchmarks set through the process of selecting a plan consultant.

Fiduciary Status

Fiduciary concerns are at an all-time high, so fiduciary status should be a primary factor to consider when selecting a plan consultant. The notion that an advisor automatically assumes the fiduciary liability of the client when hired is not necessarily true, and surprisingly a number of plan sponsors fail to understand this.

A second misconception is that all advisors are also fiduciaries, which is untrue. Consequently, any prospective consultant should confirm their role as a fiduciary both orally and in writing before being considered for their services. By hiring a consultant who can agree to this, it is ensured that the interests of the expert are inline with those of the plan sponsor, and any consultant who cannot agree to this should probably not be considered. Keep in mind that having the fiduciary support of an expert does not completely eliminate the sponsor’s fiduciary liability, but only reduces it.

Conflicts of Interest

The conflict of interest matter closely follows that of fiduciary status. However, it is worth separately noting because of its significance. Sponsors should feel comfortable knowing that their consultant is working first and foremost on their behalf, and only if a consultant is free of any conflicts of interest can he or she deliver fully reliable, objective consulting advice.

When evaluating plan consultants, discover where any potential conflicts of interest exist. One area of potential conflict that is often overlooked is the providing of private wealth management services to retirement plan committee members while at the same time providing fiduciary services to the plan. These dual roles provide the potential for putting the consultant in the middle — the very definition of a conflict of interest.

Experience

Any considered consultant should demonstrate a true specialty in retirement plans, meaning they are experienced in the complexities of retirement regulations, are aware of regulatory changes, and are knowledgeable about best practices and industry trends. While looking for a retirement plan consultant rather than just a “consultant” is a good start, plan sponsors should look beyond to seek out the best consultant.

A simple measure of a consultant’s experience is their years in the business; however, this does not do much to narrow down a search, as there are countless consultants with years of experience to serve as a credential. Another important question is how much of their focus is dedicated to retirement plan consulting. Is it a primary focus, or one of numerous types of investment consulting they do? Determining where consultants obtain their revenue is a good way to see where the rubber meets the road.

More indicative of experience and overall quality of an advisor is client satisfaction. When deciding who to hire, a plan sponsor should request client references from the prospective consultant that can attest to their quality as an experienced expert in the business. Even better is a consultant that takes the initiative to provide such references, showing a strong confidence in their experience and consulting abilities.

Communications, Availability, and “Fit”

The assistance and guidance of a consultant should be both meaningful and timely. In searching for the right consultant, the availability and communications of the expert should be evaluated and taken into consideration. This particular facet is very difficult to gauge in the selection process since just about every consultant will guarantee their ongoing availability at
this phase of the relationship; however, there are several indicators to look for in this stage.

First, you should make note of a prospect’s responsiveness over the course of the process, gauging things as simple as email responses or returned phone calls. Was the consultant proactive in getting to know you and your firm or did they just rely on the materials you provided?

Second, you should analyze any materials given to you by prospects. Good consultant communication demands customized documents and reports with data that is specific to the client. During the selection process, you should observe whether received documents are unique to you or just a standard RFP response. Sponsors should not have to rely on information given in ‘one-size-fits-all’ style reports to make organization-specific decisions for their plan. Even a gesture as small as the mere insertion of your organization’s logo onto a document indicates some uniqueness to your request for services, but we suggest you go deeper to determine if their response truly was unique to your organization.

Certifications & Designations

The depth of the retirement plan consultant selection process laid out in this document attests to just how competitive the industry has become as it continues to mature. Many advisors attain certain designations, certifications, and/or association memberships to help distinguish themselves in the industry, and this is something that should be noted when sifting through prospective consultants. These attributes indicate that a consultant has superior knowledge within a given area, and can also sometimes indicate an extended network of resources available to that consultant, both of which are attractive to the varying needs of plan sponsors.

Sponsors should familiarize themselves with these certifications and designations as many are only somewhat applicable to the services consultants would be providing and some are not at all. Sponsors should not rule out an advisor solely on a lack of certifications, but the right designations can certainly add to a consultant’s value.

Next Steps For Selecting a Plan Consultant

You, as a retirement plan sponsor, serve two main duties: The first and more commonly understood role is that of providing a key employee benefit plan for an institution. More importantly, though, is the role of acting as a fiduciary on behalf of an organization’s retirement plan and plan participants. By hiring a qualified retirement plan consultant that provides the best and most appropriate advice for a retirement plan and its beneficiaries, you are that much closer to fulfilling this second role.

If you have additional questions about retirement plan consultants and their role, we’d be happy to meet with you. Give our office a call at (312) 973-4911 or email us at info@planpilot.com.

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