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Choosing a 401k Plan Investment Advisor

Like a classic Maserati or Lebron James in the open court, performance is what counts with a company-sponsored 401k plan – and that’s where a good investment advisor can help.

No doubt, companies that sponsor 401k plans for their team members lean heavily on investment advisors to steer their plans towards robust investment performance.

According to financial industry data;

— 56% of plan sponsors say the biggest value in a 401k plan is investment performance.

— 53% of plan sponsors say changes made to their investment menu were driven by a need for better investment performance.

Thus, it’s no surprise that over half of U.S. 401k plan sponsors say their largest priority when vetting plan investment managers is their ability to recommend solid investments for their company retirement plan.

That’s especially pertinent since 92% of plan sponsors work directly with investment advisors to craft an optimal portfolio management strategy (with 70% of companies satisfied with their 401k plan investment advisor

What Makes a Good Investment Advisor?

First things first. For plan sponsors, a good 401k plan investment advisor isn’t a luxury – it’s a necessity.

While an investment advisor doesn’t necessarily pick the stocks and funds that will fill your company’s 401k plan menu, he or she does map out the strategy your plan used to select the best investments and, even more importantly, will set the fiduciary standards that will define your company 401k plan going forward.

That’s just the tip of the iceberg. A valued investment advisor also provides the following all-important services for your company 401k plan.

— Be a trusted resource to all to your company employees participating in your 401k plan. An investment advisor can engage with employee plan participants (either in person, phone, email, or via video conferencing) and help them sort out their investment options, and understand their 401k plan benefits (like employee matching, plan asset allocation, and investment risk, among other issues.)

—Conduct new employee 401k plan enrollment meetings and ensure ongoing investment and financial literacy campaigns.

— Advise on potential compliance and regulatory issues that might otherwise lead to lawsuits and regulatory infractions. He or she can also be instrumental in your company 401k plan avoiding ERISA audits.

— Help your company keep your 401k plan updated an on track to regularly follow established 401k plan guidelines.

— Act as a valuable sounding board if and when your company adds or deletes 401k plan investments from its menu.

— Regularly review your 401k investment managers (i.e., the companies that run the funds your company includes in its investment menu), the plan’s investment menu, your plans recordkeeping platforms, and all fees (and disclosures of fees) attached to your company 401k plan.

Engage with former employees and company retirees to advise on proper 401k plan management guidelines and decisions.

Are you ready to get started?

Fill out the form, or give us a call at 1-888-934-4015 ext 1. We’ll send you a proposal on all of the services we offer and how low it can actually cost to run your 401k plan with us.

Best Practices in Choosing a 401k Plan Investment Advisor

When choosing a trusted, knowledgeable and efficient 401k plan advisor for your company, follow these guidelines to get the best result.

Know who can do the job for you. By and large, 401k plan advisors come from the same branch of the money management tree.

Most 401k plan advisors are either a broker or a registered investment advisor. Since brokers are under no obligation to act as your 401k plan fiduciary (unless their broker/dealer employer okays the responsibility) it’s usually best to bring aboard a registered investment advisor who can fulfill all plan advisor roles – including the 401k plan fiduciary role.

Ideally, you want a 401k plan advisor with ample financial expertise who is also well versed in ERISA regulations and can handle the regulatory and compliance side of plan advisory responsibilities. If not, your investment advisor should at least have direct access to an experienced ERISA legal professional, or a qualified 401k third-party plan administrator for optimal plan advisory decisions.

Ask the right questions. When vetting any potential 401k plan advisors, make sure to check a few key points off your “questions to ask” list. For instance, clear the air and clarify expectations by asking your candidates these potential questions

— Do you have particular expertise in the 401k investment sector – especially on key issues like ERISA and retirement plan management?

— How would you construct a plan Investment Advisory Statement?

— How do you view your role as a plan fiduciary (and how would the candidate fulfill that role?

— What 401k plan fee benchmarking strategies would you use?

— How would you approach the investment side of your 401k plan, and what fund models or structures they might use?

Be a good communicator. Your 401k plan advisor should not only be well versed in portfolio management and ERISA compliance, he or she should also be a good communicator who can easily engage and inform your company’s plan participants on the particulars of 401k plan investing.

That means a plan advisor who can advise plan participants on the 401k investments that meet their unique needs, and can easily interact with employees to see their retirement plan strategies are laid out and managed properly.

A good, trusted 401k plan advisor can prove that “ground level” support needed see that plan participants make the best investment decisions, track their portfolios regularly, advise on asset allocation decisions, and offer investment education on a regular basis.

The Takeaway on Choosing the Best 401k Plan Investment Advisor

For companies sponsoring 401k plans, choosing the best investment advisor is a serious business, and should be approached carefully and with proper due diligence.

By and large, any decision to bring a qualified 401k advisor aboard should factor in an advisor’s ability to knowledgeably advise employees on retirement planning strategies while also protecting your entire company from harmful liabilities that may come from the creation and management of your company 401k plan.

In that regard, taking the time needed to research and vet investment advisory options is highly advised, given the stakes involved in operating a safe and effective company 401k plan.

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