After 25 years of benchmarking retirement plans across Oklahoma, Terry Morgan, AIF, CPFA of OK 401k has seen some patterns that have become impossible to ignore. Too many plan sponsors work with advisors who talk a good game but fail to deliver real fiduciary oversight. The result? Higher costs, weaker investment lineups, and employees who pay the price for inadequate plan management.
Mr. Morgan has evaluated thousands of retirement plans and identified six warning signs that separate legitimate retirement plan advisors from those who are essentially expensive overhead. His insights reveal how plan sponsors can spot advisors who prioritize their own compensation over participant outcomes.
The biggest red flag? Advisors who won’t sign fiduciary agreements. Real retirement plan professionals put their responsibilities in writing as either 3(21) co-fiduciaries or 3(38) investment managers. They accept actual accountability for their recommendations. Fake advisors dodge this responsibility with phrases like “we advise, but we’re not fiduciaries.” When things go wrong, plan sponsors are left holding the bag.
Documentation separates professionals from pretenders. Legitimate advisors maintain current Investment Policy Statements, governance calendars, and detailed meeting minutes. They follow documented processes, not personal opinions. Advisors who can’t produce recent IPS documents or committee meeting records are essentially flying blind—and taking your plan along for the ride.
Share class selection reveals another major divide. Too many plans unknowingly offer high-cost share classes when cheaper institutional options exist for the same funds. Professional advisors use the lowest-cost share classes available and rebate any revenue-sharing back to the plan. They can also explain total fees in both basis points and dollars per participant. Advisors who claim their services are “free” are simply hiding their compensation in fund expenses and revenue-sharing arrangements.
Monitoring and benchmarking frequency exposes the difference, too. Real advisors deliver quarterly investment reviews, conduct regular fee benchmarking, and run recordkeeper searches every 3-5 years. They can point to specific changes—fund swaps, fee cuts, service improvements—that resulted from their analysis. Advisors who keep the same funds, fees, and vendors year after year aren’t providing oversight.
Conflicts of interest are another warning sign. Professional advisors disclose all compensation sources and avoid steering participants toward proprietary products. They answer participant questions directly rather than pushing employees to websites and toll-free numbers. House-brand fund recommendations, surrender-charge annuities, and expensive default managed accounts often signal conflicted advice.
Target date fund selection deserves special attention since most employee contributions now flow into these investments. Professional advisors can explain exactly how and why specific target date funds were chosen. They don’t simply accept whatever the recordkeeper offers or default to the fund family’s proprietary options.
Plan sponsors who recognize fewer than four of these professional practices should consider getting a second opinion. Here’s why the fees matter: if your mortgage broker wanted to add an extra 0.50% annual fee to your home loan for “advice,” you’d reject it immediately. The same logic applies to retirement plans. When advisors hide their compensation in fund expenses and revenue-sharing, they’re essentially adding that same 0.50% drag on employee accounts every year. Over decades, that seemingly small percentage can drain thousands from retirement balances, hitting executives and owners with larger balances the hardest.
