Is Your Retirement Plan Advisor Providing the Best Services?

Outsourcing retirement plan management duties to a retirement advisor can just be good business—not only are these advisors up-to-speed on the most current regulations governing retirement plan offerings and industry best practices, but they can also free up a plan sponsor’s time to focus on critical aspects of company operation. However, it’s important to evaluate these advisors at the outset (and regularly during their administration of the plan) to ensure that you’re receiving the best possible services. How can you tell if your advisor is doing a good job? Below are a few key attributes that describe a good retirement plan advisor.

Acts as a Fiduciary

Registered investment advisors (RIAs) sign on as fiduciaries to their clients’ retirement plans, imposing an obligation on the advisor to provide plan and investment advice that is in the plan sponsor’s best interest. Within this framework, plan sponsors can choose between a 3(21) advisor (a co-fiduciary that makes recommendations) or a 3(38) investment manager (a full fiduciary that has the authority to make investment decisions on the plan sponsor’s behalf, therefore absorbing much of the sponsor’s fiduciary risk). Your plan advisor should be willing to provide a written statement verifying their fiduciary status.

On the other hand, investment advisors that work for insurance companies, banks, and brokerage firms do not have any fiduciary obligations to place clients and their plan participants’ interests first. Due to the way their fee structure may incentivize the advisor to make certain investment decisions, they may provide advice that places their own interests ahead of their clients’ interests.

Plan sponsors should seriously consider switching from a non-fiduciary to a fiduciary advisor. This helps fulfill your own fiduciary responsibilities to your plan participants by ensuring that they are receiving advice and guidance that is in their best interests.

Independent and No Conflicts of Interest

It is best to work with an independent advisor whose sole line of business is retirement plan consulting and providing investment advice to avoid conflicts of interests, unlike advisors who are also asset managers or recordkeepers. While there are many potential conflicts of interest in a retirement plan, sponsors must perform additional due diligence if they are not working with an RIA. Rooting out potential conflicts can be a challenge, so transitioning your retirement management to an RIA can significantly cut down on the time and costs associated with plan oversight in addition to increasing fiduciary protection.

Practices Fee Transparency

It can be all but impossible to discern whether you’re getting the best services for the fees charged when you’re not quite sure what fees your plan and plan participants are paying. A good advisor practices fee transparency. Work with an advisor who offers fee-only or fee-for-service pricing, which means you are paying only for the services they provide and not on commission from sale of financial products. Their only source of revenue are these fee-only services.

Advisors who have fee-based compensation are essentially commission-based and variable based. They can receive income through the trading of securities or based on the performance of the plan itself. This fee structure benefits the advisor over the plan and their participants, as their recommendations do not need to be in their clients’ best interests.

A good advisor can provide you with a clear fee schedule, the structure by which fees are calculated, and which services are provided for these fees. You’ll also be able to make a more informed decision on which specific services you’d like your RIA to perform and which you’d rather keep in-house.

Provides Objective Recommendations

Every organization is different, and the funds and objectives that work well for one may not be well-suited for another. Similarly, there are varying demographics and investor styles to consider. As a result, it is key to have an advisor with the fiduciary obligation to work in the best interest of your plan and plan participants by offering objective advice and recommendations.

An advisor that is employed with an RIA firm is, by the nature of the RIA designation, exempt from the financial conflicts of interest that can be common among brokers, bank or insurance agents, asset managers, and others who need not provide advice that is in their clients’ best interest.

Offers a Full Menu of Services

There is a lot that goes into the management of a retirement plan. Producing reports, monitoring investments, conducting fund searches, regularly benchmarking, maintaining fiduciary compliance and creating important plan documents such as the Investment Policy Statement are just a few core advisory services that should be provided. They should also assist in participant education, plan design and plan governance in addition to managing your recordkeeper and other plan providers. You should seek out a plan advisor that offers a comprehensive menu of services to assist with all facets of your plan.

Choose PlanPILOT as Your Retirement Advisor

If you need assistance in administering your retirement plan, look no further than PlanPILOT. Our experienced consultants provide tailored advisory services for organizations with plans of all sizes and types and can work with you to help your plan participants achieve positive outcomes. As an independent Registered Investment Advisor, PlanPILOT is not tied to any investment fund or recordkeeper. Learn more about the services we offer.

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