Is your retirement plan leveraging an expert advisor?

Employee benefits are increasingly relevant in today’s tight labor market. Companies need to offer competitive benefits packages to attract, retain and motivate employees. At the same time, retirement plan sponsors face growing challenges from litigation and regulation.

“If you’re a plan sponsor, you’re serving as a fiduciary. You want an airtight fiduciary process around you. But just as importantly, if you do it right, you provide a great benefit for your employees,” says Steve Wilt, CIMA, senior vice president and financial advisor at CAPTRUST.

While expert retirement plan advisors have been around a long time, their value has become more widely recognized over the past five years, he says.

Smart Business spoke with Wilt about how to find advanced retirement plan counsel.

What do you mean by ‘expert advisor’?

Expert advisors holistically help companies run their 401(k), pension or nonqualified benefit plans. They serve as a co-fiduciary. They monitor the investments and help employers build world-class benefits plans, while giving advice to the plan’s participants.

The right retirement advisor has a passion for helping employees. This is the largest pool of wealth most working Americans accumulate and manage in their lifetime. In today’s challenging markets, these employees can make mistakes if they don’t have good investment advice.

A non-expert advisor may just monitor mutual funds without engaging completely in the retirement plan, connecting directly with plan participants or acting as a fiduciary.

Why is it critical to hire a co-fiduciary?

Some advisors serve as a co-fiduciary and some don’t. Being a fiduciary is key to helping plan sponsors mitigate risk by ensuring their plans are developed with plan participants’ best interests in mind.

At the very least, plan sponsors may be overpaying in fees, not offering best-in-class funds or failing to provide timely advice to plan participants. The Department of Labor is also getting more involved with investigations. (It no longer calls them audits.) If you’re not doing things correctly, you may have to pay penalties or fines.

The worst-case scenario would be litigation. Increasingly, class action lawsuits are filed against large plans for excessive fees, improper monitoring of funds or not benchmarking their plans, which are all things an expert advisor can help plan sponsors with on an ongoing basis. Lawsuits also are starting to move into smaller plans.

However, these challenges are leading to better behaviors by plan sponsors, which helps employees through more reasonable costs, closely monitored funds and better-built retirement plans.

How do plan sponsors know whether their advisor is serving them well?

The best way to figure out if you have an expert advisor or not is to conduct due diligence. Meet with multiple advisors to ascertain what services they will offer. More specifically, benchmark your plan periodically. A good way to do this is through a request for proposal (RFP) that identifies three to five experts. Organizations like the Retirement Advisor Council provide template RFPs. Some base questions are:

  • Are you serving as a fiduciary?
  • How many plans do you service that are the same size as mine?
  • What kind of fiduciary assurances does your firm carry?
  • What support do you have? Do you have a centralized model to deliver that support?

Often, plans have been with the same advisor for years; that advisor may or may not be an expert, but the plan sponsor doesn’t know. That’s where they can get into trouble — by not benchmarking and documenting the process. It will become clear, as you go through the process, whether or not your advisor is elite.

What else should employers know?

There’s more than one type of elite expert on a retirement plan; stay away from advisors who dabble or work in the space part time. Along with a financial advisor or investment consultant, you’ll want an accounting firm for plan audits (if you have at least 100 plan participants), an ERISA attorney and an expert employee from human resources or finance. You want a solid team of people around you to manage the plan the right way and create differentiated value for your employees.

Insights Retirement Planning Services is brought to you by CAPTRUST