Many HR people inherit their current plan advisor or pick someone because they are a friend of a friend or, even worse, related to a senior executive. That advisor might be qualified, but how do you know? A 401k plan sponsor at a TPSU program held at Marquette University describes the process he went through choosing a new plan advisor.
One of the issues that drove the search for choosing a new plan advisor was the need to provide bi-lingual education. The plan sponsor was also looking for someone from a larger organization that had deep fiduciary expertise. Being new to the HR role, the plan sponsor wanted an advisor that could help the HR staff as well as the employees to make sure that the company was fulfilling their fiduciary responsibilities. The new DOL conflict of interest rule set to go into effect April 10, 2017 will mean that more advisors will be considered to be acting as a co-fiduciary which means, in turn, that plan sponsors have to be sure that the advisor not only has the requisite knowledge and experience to act as a fiduciary but also has the financial backing in case something goes awry and litigation ensues.
Though the process choosing a new plan advisor did take six months, as the HR manager had other matters to handle, the result was worth it. The outcome was a new bi-lingual plan advisor that is bringing new ideas to the company about how to manage their plan and fiduciary duties as well as working with their employees. Though 250,000 of the active 300,000 financial advisors work on a defined contribution (DC) plan like a 401k or 403b, only 25,000 are barely qualified with at least $25 million of DC assets under management and 10 plans – of those there are 2,500 elite advisors with more than $250 million. Very few take the time to get rigorous fiduciary and industry education that requires to keep updated. (See directory of advisors with a C(k)P designation from TRAU, a collaboration with UCLA Anderson School of Management.)
The plan sponsor at the TPSU program held at Marquette University wisely choose to first start the 401k service provider review process with their advisor who can then, in turn, help with the review and selection of their record keeper which is next on the docket. (For help bench-marking and finding a new advisor, go to 401kTV’s ePADD service.)
