Finding a good investment advisor that fits your needs is an important, yet equally time-consuming, process. When selecting an investment advisor to your plan, there are certain things you should keep in mind that will help assure successful operation of the plan and limit your liability as a fiduciary to the plan.

1. Independent Advice

Independent advisors are more likely to be bias-free and embrace full fee disclosure. Captured advisors, or advisors who work only with proprietary platforms, are usually compensated by the proprietary platform providers for selecting their platform and investments. Also, investment options are generally limited or restricted, preventing an advisor from truly selecting a best in class investment lineup.

2. Unbiased Investments and Fee Transparency

Make sure to select an investment advisor who will work with an open architecture investment platform assuring that, throughout the lifetime of the plan, you will have access to the broadest range of best in class investments to select from and ultimately offer to the plan participants. The use of an open architecture platform also allows for full fee transparency and revenue sharing, thus allowing plan advice to be free from bias and influence.

Open architecture refers to a trading and recordkeeping platform that makes a wide range of investment vehicles available to a retirement plan and its participants. An advisor who works with an open architecture environment can assure that all funds are offered at net asset value and that compensation is not affected by the investment provider and/or investments that an advisor recommends to you, thus eliminating undue influence.

3. Participant Support

Be certain that your advisor does not limit their support to just the plan sponsor. Support from your plan service providers is critical to creating a strong value proposition around your employee benefits program, including your retirement plan.

Advisors that provide participant support will help your employees select appropriate investments, provide ongoing education and monitor participant allocations by recommending changes that may be needed over time.

4. Experience

Make sure that the investment advisor you select has the skill and experience necessary to advise on a company retirement plan, as well as support you in meeting your fiduciary obligations. 

The majority of investment advisors out in the marketplace serve as individual wealth advisors vs. retirement plan advisors. Nowadays, advisors are attempting to enter the retirement plan space so as to not lose their individual wealth clients. The responsibilities related to advising on a company retirement plan are vastly different from the fiduciary obligations an advisor has when advising on individual wealth.  Most important is the support you will need in communicating the plan to your employees as well as making sure that all ongoing and new Internal Revenue Service (IRS) and Department of Labor (DOL) requirements are fulfilled.

5. Reasonable Fees

Search for an advisor that fits your budgetary needs, while staying focused on long-term opportunities as the plan grows. Make sure that any fees are properly disclosed and that advising is free from bias and influence.

If you are a small plan (under $1 million in plan assets), some retirement plan advisors charge a minimum fee of $3,000-$5,000 annually, which is not an ideal pricing schedule for a small plan.

Read also: Frequently Asked Questions Regarding 401(k) Plans


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