Questions 401k and 403b Participants Should Ask When the Plan Advisor is Changed

With the new DOL fiduciary rule set to become effective June 9th shining a bright spotlight on advisors working on defined contribution (DC) plans like 401ks and 403bs, scrutiny by plan sponsors is expected to intensify. The DOL rule will force many advisors to act as a fiduciary which will in turn force many of the over 200,000 advisors without necessary experience or training to either opt out or get serious creating massive turnover.

So what questions should plan participants be asking when a 401k or 403b change their plan advisor?

Credentials & Experience?

Along with years in the DC business as an advisor and experience working with similar 401k or 403b plans, advisors need training and on-going education. Minimum experience is usually $25 million and 5 plans of which 25,000 qualify. Of those, 2500 plan advisors have $250 million and 10 years’ experience leaving over 200,000 advisors without the necessary background to help participants properly. (See TRAU Advisor Market Profile and 401kTV Advisor Directory.)


What was the process used to select the advisor? The best way is through an RFP (request for proposal). At a minimum, criteria for what is needed for employees, the plan and the company should have been documented and multiple advisors should have been interviewed. The worst method is that the advisor is a friend or relative of a decision maker at the company without minimum experience and training selected without process.


Will the advisor meet with participants providing education as well as one on one meetings providing advice?


Are the advisor’s fees reasonable? Did the plan sponsor benchmark them? Are there additional costs to participants who get advice? Does the advisor help with assets outside of the plan and are there additional fees?

Previous Advisor?

Why was the previous advisor let go? Can participants still use them to advise on assets outside the plan?

Act as a Fiduciary – Conflicts?

Will the advisor act as a fiduciary? Many conflicts would be eliminated if the advisor’s compensation does not vary by the products they recommend required by a fiduciary, but are there hidden incentives by the advisor’s broker dealer for selling certain favored products? Is the advisor limited in the products they can recommend?

The 401k or 403b plan advisor may be the only financial professional that many employees ever speak with and there is usually a level of trust because the advisor was selected by the plan sponsor. So plan sponsors should choose wisely not just to mitigate their own liability but also for the sake of their employees

Fred Barstein

Fred Barstein

Founder & Editor-in-Chief at 401kTV | TRAU | TPSU
Fred Barstein is the Founder & Editor-in-Chief of 401kTV. Fred is also the Founder and CEO of The Retirement Advisor University (TRAU), a collaboration with UCLA Anderson School of Management Executive Education and The Plan Sponsor University (TPSU).Mr. Barstein was also Founder and Editor-in-Chief of NAPA Net.
Fred Barstein

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