How Do You Know If Your 401k Plan Advisor Is Any Good? The question of how to evaluate a 401k plan advisor came up frequently by 401k and 403b plan sponsors attending a TPSU program held at the Thunderbird School of Global Management, ASU. The VP of HR at a 3500-person organization explores that issue in an exclusive 401kTV interview.
One of the reasons that the HR VP came to TPSU was to evaluate their current plan advisor by learning from experts and peers. He inherited the plans advisor and, though satisfied with service, there was no comparison by which to judge not knowing what might be missing.
At TPSU he learned three valuable ways to evaluate and improve advisory services:
- Leverage his network to find and talk to other advisors
- Push the current advisor to provide more services to the committee and the employees
- Use a third-party to benchmark the advisor
Though RFPs are the most popular way for 401k and 403b plan sponsors to find their current advisor according to the 2017 TPSU/NAPA Plan Sponsor Survey (20% overall and 38% for plans with more than $50 million), the second most popular way is they the advisor was inherited followed by recommendations from a colleague.
Overwhelmed by other duties and not sure how to best proceed, many HR and finance people that run their company’s DC plan may just stay with the current advisor as long as there is no problem. But the TPSU/NAPA Survey indicates that twice as many plans that were very satisfied with their advisor found them through an RFP compared to inheriting them or through a referral. And the number one reason that plans were looking for an advisor was that the plan simply outgrew the capabilities of their advisor – not poor service or high fees.
Short of an RFP or benchmarking, plan sponsors should look at the education and training of their advisor which was considered an important factor by 92% of plan sponsors in hiring a new advisor according to the Survey. 401kTV provides a directory of plan advisors that have received their C(k)P (Certified 401k Profession) sponsored by TRAU, a collaboration with UCLA Anderson School of Management Executive Education, and the only industry designation that requires industry experience – 10 plans, $30 million and 3 years.
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