Most defined contribution (DC) plan sponsors work with an advisor with recent research indicating that almost 90% of companies with 25-10,000 employees sponsoring a plan using one. But the level of experience, talent and knowledge varies widely among DC plan advisors. A plan sponsor attending a TPSU event held at the University of Alabama Huntsville talks about what she calls her “Activist plan advisor”.
Of the 300,000 financial advisors in the U.S., 250,000 either work on or get a referral fee from a DC plan. Only 25,000 advisors have at least $25 million of DC assets and more than 10 plans under management which is the minimum to be considered qualified to effectively work on a DC plan and there are just 2500 “Elite” plan advisors who have at least $250 million. Finding a qualified DC advisor can be difficult but finding one that fits the needs of a plan sponsor and is proactive can be even harder. (See 401kTV’s Advisor Directory and resource to help plan sponsors conduct an advisor RFP).
During the process of forming a committee, the plan sponsor attending the TPSU Huntsville program decided to also look for an advisor. Before their search began, an advisor approached them after conducting extensive homework on the company and their retirement plan. He was proactive with suggestions so that by the time the plan spoke to other advisors, the “activist” advisor had a huge advantage.
The new plan advisor continues to be proactive not just meeting employees two days every quarterly, but also making suggestions to the committee. Some advisors are responsive but the really good ones don’t wait for plan sponsors to ask questions. Sometimes you don’t know the questions to ask or realize that something is wrong or missing. Hiring the right and best advisor for your plan will usually not cost more and, even if they do while adding value to the plan and working with employees, it’s money well spent. Do you have the right advisor for your plan? Over 50% of DC plans in the U.S. employ a less than qualified advisor – very few have an “activist advisor”.
