Finding a good investment advisor that fits your needs and the needs of your work force is like discovering that piece of a puzzle in a pile of ambiguous colors and shapes that when applied, finally brings the picture you’ve been working on into focus. Searching for an investment advisor that prioritizes your business’ needs is more important yet an equally time-consuming process, but necessary if you want to see your own company-sponsored retirement plan come into focus and perform optimally to meet your goals.

When selecting an investment advisor there are a few considerations that will not only help ensure successful operation of your retirement plan, but also limit your liability as a fiduciary of the plan. Here we have listed the top 5 things to keep in mind when choosing an investment advisor:

1. Independent Advice vs Captured Advice

Independent advisors typically work with third-party administrators (TPAs), like Leading Retirement Solutions, instead of the larger proprietary platform providers. When working with TPAs and with an open architecture investment environment, investment advisors are not limited to a particular set of investments (which typically creates bias towards proprietary investments) but have access to a wider range of investment options. One of the benefits of this arrangement is that it encourages advisors to also embrace transparent service and fee disclosures.

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 for your company-sponsored retirement plan.

2. Unbiased Investments and Fee Transparency

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

If you’re unfamiliar with what open architecture is, it’s a trading and recordkeeping platform that makes a wide range of investment options available to a retirement plan and its participants. This type of platform is free from requiring or recommending proprietary investments. An advisor who works with an open architecture platform can ensure that all investment options (e.g. mutual funds, ETFs, etc.) are offered at net asset value, which gives you more reasonably priced investment options and also helps eliminate the influence of bias over your advisor.

See why businesses are demanding customized retirement plans.
3. Participant Support

A good investment advisor will not limit their support to just the plan sponsor, but also should support you in communicating the retirement plan to your employees. They will take co-fiduciary responsibility for the investment they recommend and also assist your employees by advising them on which investments they should select; taking into consideration their financial needs, retirement needs and more.

Advisors that provide participant level 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

Your investment advisor should have the skill and experience necessary to advise on a company retirement plan, as well as support you in meeting your fiduciary obligations. Though this may seem obvious, what you may not know is that the majority of investment advisors out in the marketplace serve as individual wealth advisors and not retirement plan advisors. The difference is that 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 accounts.

Especially nowadays, there has been increasing numbers of individual wealth advisors attempting to enter the retirement plan space in an effort to not lose clients. Just make sure the investment advisor you select is experienced advising on company-sponsored retirement plans. This experience is particularly important and necessary in supporting you with all ongoing and new Internal Revenue Service (IRS) and Department of Labor (DOL) requirements.

Ultimately, as the fiduciary on your company-sponsored retirement plan, you are responsible for keeping the plan in compliance with all IRS and DOL regulations. If your investment advisor makes a mistake, you (and your company) are the ones who will  suffer the penalties.

5. Reasonable Fees

Search for an advisor that fits your budgetary needs, while staying focused on long-term opportunities as the plan grows. As an example, some retirement plan advisors charge a minimum fee of $3,000-$5,000 annually, which if you are a small plan (under $500,000 in plan assets) this is not an ideal pricing schedule, although the investment advisor may certainly be worth it.

The key takeaways or questions to keep in mind are:

  • Is the investment advisor free from bias and influence?
  • Are they working in an open architecture platform or proprietary platform?
  • Are all services & costs fully disclosed?
  • Do they offer support to all participants, not just plan sponsors?
  • What is their experience advising on company-sponsored retirement plans?
  • Are their fees reasonable for your plan size?

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