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Your Plan’s Investment Professional – Eight Questions to Ask

Investment Professional

Your Plan’s Investment Professional -Eight Questions to Ask. As a plan sponsor, how do you know you’re working with the right investment advice provider? Employee Benefit News (EBN) offers a list of eight questions to ask (in order of importance):

Question #1: Are you a fiduciary for the recommendations you make?

This question is in the top spot for a reason — it’s super-important to get clarity on the type of adviser (or advisor) you’re working with. There are two different types of investment advice providers: Advisers (with an -er) who work for Registered Investment Advisory (RIA) firms, who are required to act as fiduciaries and provide advice that is in their clients’ best interest. Advisors (with an -or), who typically work for banks, brokerage firms, and insurance companies need only provide suitable advice. According to EBN, ideally, you always want to work with an investment adviser who’s required to act as a fiduciary.

Question #2: How are you paid?

Knowing the source of your investment advice provider’s compensation is critical. In general, EBN concludes that working with advisers who receive 100% of their compensation from client invoices makes it easier to figure out what they’re actually being paid and avoid potential conflicts of interest.

Question #3: Does the company you work for sell investment funds/products?

It’s fine if the answer is yes — just make sure your investment provider is ultimately recommending the best solution (high-quality and reasonably priced) for your plan. EBN says RIA-affiliated investment advisers are more apt to provide recommendations that fit these criteria.

Question #4: What professional credentials do you have?

Sponsors should hire credentialed professionals with some sort of retirement plan designation (AIF, CRPS, QPFC, or CPC). That way, you can be assured they understand your plan’s needs, and that they have likely met minimum experience requirements.

Question #5: What is your educational background?

As EBN puts it, you want to work with an investment adviser, not a salesperson. Ideally, then, your adviser should have a degree in finance, economics, or investments, and perhaps even an MBA. Bottom line: Hire someone with the background and expertise necessary to meet your plan’s needs.

Question #6: How many years have you been an investment advice professional?

We’re nearing the end of a nine-year bull market. That means many professionals who entered the retirement plan business have never experienced a severe market downturn. When hiring an investment advice professional, you want to work with someone who’s “been there, done that,” and weathered both up and down markets.

Question #7: What does your ideal client look like?

While the pat response you may get is “just like you,” do your research to make sure that’s actually the case. Your investment professional’s book of business should include mostly clients with a plan size and demographics similar to yours. If not, keep looking. A professional who understands your plan’s needs is more likely to give you exactly what you need, not “close enough.” There are plenty of advisers out there, so it should be easy to find a good fit for your plan.

Question #8: What happens to my business if you are gone?

Personally, we would have ranked this question higher in the importance hierarchy — it’s a key one to ask. You want to make sure your plan will continue to be serviced with the same quality and care if your adviser changes firms or exits the business.

According to EBN, all of these questions are easy for your adviser to answer. If you don’t receive prompt, complete answers, consider putting your business out to bid so you can find an investment professional who’s better suited for your plan and participants.

Robyn Kurdek

Robyn Kurdek

Freelance writer with nearly 2 decades of financial industry experience, with niche expertise in the defined contribution (DC) industry. I also have defined benefit (DB) plan knowledge. I write all types of content for retirement plan participants, sponsors and advisors, including web copy, newsletters, white papers, fact sheets, blog posts, financial wellness articles, and more. "I speak DC."
Robyn Kurdek

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