Q. Who are the fiduciaries of your plan?A. This is one of the biggest misunderstandings we routinely encounter. Everyone who makes plan-level decisions is a fiduciary. The people who appoint those fiduciaries also have fiduciary responsibility. See Board Member best practices: A "heads-up" regarding the retirement plan responsibility chain." Being a fiduciary isn't a bad thing, if those individuals understand their responsibilities, liability, and their obligations to the plan's participants under the Employee Retirement Income Security Act of 1974 (ERISA). A seasoned advisor that accepts co-fiduciary status can help the plan's investment committee and other plan fiduciaries to navigate their responsibilities and excel on behalf of the plan participants.
Q. I've got a "big logo" provider, aren't I all set?A. Ask them if they accept fiduciary status for your plan. If they don't, then they may be more interested in looking out for their own interests, and not necessarily yours and those of your plan participants. See PlanSponsor Magazine article, "Plan advice: All set? Maybe, maybe not! Part 1: The all-important difference between information and advice." The reason most service providers will not accept fiduciary status is they want to be free to promote their investment products and services without being subject to conflict of interest rules. This doesn't make them evil. It's probably smart business. But, as a fiduciary, you are obligated to understand which side of the table they are on and to act accordingly. Look at the last investment review book they provided, and see if it contains a disclaimer that they are not offering advice. Offering advice for compensation is a fiduciary act. Most vendors say they provide only information, and not advice. The difference is; you are on your own if trouble arises. A seasoned retirement plan advisor can work with you and your plan vendor to improve outcomes by providing an unbiased, independent viewpoint on investments and other plan business.
Q. Aren't all advisors about the same?A. No. You probably wouldn't go to a recently graduated general practitioner if you needed specialized surgery - likewise if you needed a lawyer or architect. There are a lot of "blind squirrels" out there -- brokers that got the business because they knew one of the key people, not because of their expertise. If they do a great job, and offer reasonable value to the plan, then there's no problem. But if they don't, your participants may be getting shortchanged. That's bad for your participants and risky for you and your plan's other fiduciaries.
Q. Isn't it expensive to work with an advisor?A. No. We could argue that it is expensive not to work with a qualified advisor, because of possible lost investment opportunity and the cost of fixing mistakes. This is a very competitive environment, with excellent value available. And, depending on your plan's economics, your plan vendor might be willing to absorb or share the cost.
Q. What can an advisor do for me and my employees?A. A good advisor will help you to sleep better by assuring you that your plan is being managed responsibly and with the participants' best interests in mind. With the right advisor at work, chances are more of your employees will join the plan, appreciate the benefit, and enjoy better outcomes.
Q. How do I select an advisor?A. Look for the right combination of ideas, professional accomplishments and chemistry.
Q. Isn't bigger better?A. No. If the price were essentially the same, wouldn't you prefer the personalized service of a specialty store to the experience of shopping at a mass-market chain? If the advisors have the right credentials (not just "alphabet soup" after their names), and if they have E&O insurance from a reliable carrier, then there are no disadvantages-and potentially several advantages-to dealing with a smaller specialty firm. In fact, you are likely to find a focused firm values your business more; offers you more opportunities to routinely interact with principals; is more creative; and, as a result of a more nimble operation, demonstrates quicker turnaround times.