We were overwhelmed by the response to the April 2nd 401(k) Café 30-minute webinar, “What You Don’t Know Could Hurt You.” Many of you were engaged, actively participating in the discussion and bringing valuable insights and questions. Our next program is scheduled for May 7th at Noon ET.
At the recent 401(k) Café, we reviewed the Top 10 Mistakes 401(k) and 403(b) Plan Sponsors Make Regarding Their RPA. Selecting the right advisor for your employees and organization is one of the most important decisions you’ll make—while monitoring them may be your most critical responsibility. Your advisor should oversee all activities except for one.
So here are the top 10 mistakes:
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You don’t have an advisor or don’t know who they are. Over 90% of plan sponsors have an independent advisor not affiliated with their record keeper or asset manager.
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You don’t utilize your RPA properly. They should be involved in all aspects of the plan, even if they don’t perform every duty directly—including oversight of other vendors.
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Your RPA is not an investment co-fiduciary (3(21) or 3(38)). More plan sponsors are shifting toward 3(38) advisors, who take on greater liability by making investment decisions. Ensure co-fiduciary status is clearly documented in writing.
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Your RPA is a “Triple F” only—funds, fees, and fiduciary. While these services are important, they are just the basics. More plan sponsors are turning to RPAs for broader financial guidance, including participant advice on financial wellness.
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RPA due diligence is overlooked. This is the one responsibility your current advisor should not handle for themselves. With massive RPA consolidation, if your advisor sells their practice, an RFP is necessary to reassess their service model.
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You haven’t conducted due diligence on your advisor in the last three years.
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You allow your RPA to benchmark themselves. Benchmarking is backward-looking and can be manipulated based on selected time periods and data sets.
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You let your current RPA conduct their own RFP or RFI (Request for Proposal/Information).
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You don’t fully understand how your RPA is paid. You should also know whether their home office (RIA or broker-dealer) receives additional compensation from investment or recordkeeping services. The SEC recently fined a broker-dealer/RIA $93 million for failing to disclose compensation conflicts. RPAs may be paid via:
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Commission: Paid directly by providers or investment managers, which may create conflicts of interest.
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Asset-based fees: The most common structure.
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Flat fees + additional service costs: The fastest-growing model.
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Your RPA pushes proprietary products. Some firms have been fined for promoting high-cost proprietary investments while acting as fiduciaries. Additional red flags include RPAs who only work with a single record keeper, fail to schedule and document retirement committee meetings, or use complex acronyms and tax code references without explaining them in plain language.
TPSU training, offered through over 600 half-day programs, focuses on the role of the advisor and other vendors. Choosing the right advisor gets you 90% of the way toward improving plan outcomes while reducing workload, liability, and costs.
Our next 401(k) Café will be held on May 7th at Noon ET, with registration limited to the first 1,000 attendees (Register here using the Referral Code: May401kCaféNewsletter. All DC plan sponsors who attend and stay through the session will receive a Starbucks gift card. You can also watch the April 2nd program here using the Passcode: 3kyQ@qJT.
