Choosing the Right Advisor: The Case For Independent Due Diligence

Choosing the Right Advisor: The Case For Independent Due Diligence

Choosing the right advisor is the most critical decision a 401(k) or 403(b) plan sponsor can make.  With many advisors in the market, there are more dabblers than true professionals, making it vital for plan sponsors to carefully assess whether their current advisor is genuinely qualified.  As sponsors become more aware of the importance of selecting the right retirement plan, they are also beginning to question if they have the right advisor guiding them.  One crucial question can help determine this: “Should I hire an independent third party to conduct due diligence on you?” If the answer is no, it’s likely time to switch advisors.

Qualified Retirement Plan Advisors (RPAs) often encourage independent benchmarking or requests for proposals (RFPs) because they have nothing to hide, including their fees. They understand that ERISA fiduciaries are required to perform due diligence on all vendors paid from plan assets.  An RPA who advises independent reviews for investments and recordkeeping but excludes themselves from scrutiny raises a red flag.  However, it’s crucial that an RPA conducting due diligence remains impartial and does not select themselves for the evaluation.  To support plan sponsors, TPSU offers a comprehensive suite with RPA Due Diligence, providing tools through the rpaDD Center, including benchmarking, RFI, and full RFP services. The Plan Sponsor University (TPSU), which has educated over 10,000 plan sponsors through half day live training programs and online curriculum since 2013, is an independent trusted source not affiliated with any provider or advisory firm.  The Retirement Advisor University (TRAU), our affiliate organization, has trained over 2,000 RPAs.

At the conclusion of a TPSU Program held at Boston College, Fred Barstein, founder and CEO of TPSU and 401k TV, interviewed Colleen, who works for a small family-owned construction company as the plan administrator and a trustee.  Colleen was one of the first clients to use RPA Due Diligence, a process she undertook as part of her fiduciary responsibilities.  Despite being satisfied with her current advisor, she wanted to ensure she was meeting her obligations and turned to TPSU for guidance.  The process confirmed that her advisor was doing a great job, reassuring her that she was fulfilling her fiduciary duties.

Read the Full Transcript Here:

Fred Barstein:

Greetings. This is Fred Barstein, founder and CEO of TPSU and 401k TV. We just completed a program at Boston College, my alma mater and I am here with Colleen. Colleen, welcome.

Colleen:

Hi there.

Fred Barstein:

Okay if we ask you a few questions?

Colleen:

Certainly.

Fred Barstein:

Okay. Before we do, tell our audience a little bit about yourself.

Colleen:

So I work for a small family construction company. There are four of us in the ownership. My role is I run the office and I am our plan administrator and also one of the plan trustees.

Fred Barstein:

Okay. So Colleen, you were one of our first clients for our RPA due diligence. Thank you for that. And at the time when you came to us, you had changed advisors since the first program, you came to. Good advisor and you were happy. Why did you do, I think in the case was an RFI request for information?

Colleen:

Well, as part of my role, I am a fiduciary and I have to do my due diligence and I am inundated with phone calls offering to do this for me. However, because I’ve been to several events, I felt that you were the best person to get the information from.

Fred Barstein:

Well, thank you. And so how was that process and would you recommend people to do it?

Colleen:

It was great. I gave you all of the information needed to have that completed. I did not get cold calls. I did not have people trying to tell me that they could do better than what I was getting now, unsolicited. When it was done, I actually got confirmation that my advisor is a great advisor and I felt confident that what I’m doing is working, what my advisor is doing is working and that I am meeting my fiduciary responsibility.

Fred Barstein:

And you had a document that you could put in your file.

Colleen:

Right.

Fred Barstein:

Like I said. Well, great. Well thank you for that and thank you for the trust you put in us. Final question, TPSU, a couple of things you might’ve picked up today that you want to bring back.

Colleen:

Oh, every time I attend one of these, I glean great information, but today’s information was definitely education, education, education and anything we can do to add value. Auto enrollment, auto escalation, how is the industry changing, keep up with the change and do what we need to do, not only to meet the Secure 2.0 Act, but just to help our employees help themselves.

Fred Barstein:

Very good. Well, thank you for coming and thank you for watching 401k TV. Please stay tuned for more programs like this.

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