Choosing the right financial advisor for your retirement plan is one of the most important decisions you’ll make as a plan sponsor. It’s also a fiduciary responsibility under ERISA—meaning you need to show your work when it comes to due diligence.
The good news? Several free, publicly available tools can help you research prospective advisors before making a decision. In a recent Case of the Week shared by PSCA, the ERISA consultants at the Retirement Learning Center outlined where plan sponsors can turn to investigate a candidate’s background, complaints, and potential red flags.
Before diving into research, know what you’re looking for. Plan sponsors should understand how a prospective fiduciary charges for their services, whether those fees are reasonable, what experience and qualifications they bring to the table, and what their reputation looks like in the investment advisory industry.
Start by requesting Form ADV from the prospective advisor and their firm. This disclosure document, filed with the SEC or state securities administrators and updated annually, covers everything from fees and services to potential conflicts of interest and any professional disciplinary actions. It’s designed to provide transparency between advisors and clients, and it’s a must-have for any due diligence file.
From there, FINRA’s BrokerCheck website offers a wealth of information on brokers and dealers, including employment history, qualifications, customer complaints, regulatory actions, and criminal matters. All you need is the advisor’s name and firm to look them up.
FINRA’s disciplinary action database is another helpful resource. It includes disciplinary actions issued since 2005 that are eligible for publication, as well as SEC opinions and federal appellate court decisions on appealed actions. Together, these tools give plan sponsors a fairly comprehensive view of an advisor’s professional track record.
Don’t overlook state-level resources, either. Every state has its own securities laws—often called “Blue Sky Laws”—that license brokerage firms and investment advisor representatives. The North American Securities Administrators Association website provides links to state regulators if you want to dig deeper.
And while these professional databases cover a lot of ground, they won’t capture everything. A basic internet search on a prospective advisor may turn up additional information worth considering.
Of course, doing the research is only part of the equation. Documenting your selection process thoroughly is the best defense against potential fiduciary breach claims. A well-organized file that shows how and why you selected an advisor can go a long way if your decision is ever questioned.
The bottom line: Hiring a retirement plan advisor requires more than a good feeling. Take advantage of the free tools available to make an informed, defensible choice—and protect both your plan and your participants in the process.
