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401k Record Keeper and Advisor – What’s Their Role?

What’s the Role of a 401k Recordkeeper and Advisor? The roles and responsibilities of the various service providers are confusing to 401k and 403b plan sponsors. Those relationships are even more confusing because sometimes the roles change depending on the package a plan sponsor buys.

The weekly 401kTV Vlog using a health care analogy explains the roles of 401k and 403b record keepers, advisors, money managers and third party administrators (TPAs).

The Recordkeeper is the hospital in the 401k or 403b relationship with advisors acting as doctors. Money managers are akin to pharmaceutical companies with TPAs like outpatient surgery centers.

The key for plan sponsors is to hire the right doctor or advisor who should be an expert on, the one hand, diagnosing the issues with the plan and the participants, and then recommending the right treatment. They will then recommend the right record keeper, TPA and money managers based on which ones have experience with the issues faced.

While plan sponsors should rely on advisors to do the research, as a fiduciary trusted to make decisions for others, like a parent, they should make sure that the advisor is qualified and free of conflicts. Are they selecting a record keeper or money manager because they or their broker-dealer gets more financial support?

Which is why the department of labor issued their conflict of interest rule which came into effect June 9, 2017. Most advisors will be forced to act as a co-fiduciary and, regardless of the funds they select, will be paid the same or level compensation.

The DOL rule and the growing importance of 401k and 403b to the financial security and well-being of employees is raising the stakes for plan sponsors. Understanding the relationships of the service providers and making sure they are qualified and properly performing a job is their key role. Getting it wrong can hurt the company, their employees and could result in fines and lawsuits.

Fred Barstein

Fred Barstein

Founder & Editor-in-Chief at 401kTV | TRAU | TPSU
Fred Barstein is the Founder & Editor-in-Chief of 401kTV. Fred is also the Founder and CEO of The Retirement Advisor University (TRAU), a collaboration with UCLA Anderson School of Management Executive Education and The Plan Sponsor University (TPSU).Mr. Barstein was also Founder and Editor-in-Chief of NAPA Net.
Fred Barstein
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