6 Questions to Ask Your 401(k) Advisor to Know What Kind You Have

Salesman Knocking on the Doorchecklist_400_clr_2328

Being registered to sell investments does not mean that you know anything about a 401(k) other than it has investments. Some advisors to plans are investment generalists and not 401(k) savvy. The few advisors that focus on 401(k)s primarily focus on helping the company’s decision-makers vs. focusing on helping employees use the plan to retire comfortably. Here are some questions to ask to find out what kind of advisor you have.

Are you an independent 401(k) advisor?

A 401(k) advisor that is unbiased and independent should understand the landscape of options. Some companies that advisor work for limit the options they can show you. Some providers limit the investment options available based on contractual relationships, not because the investments are good.  Beware of the misuse of the term open architecture. It may just mean less limited. If the advisors business card is the same as the company that sells the retirement platform and the investments inside them, they are not.

Will you get paid fees or commissions?

Advisors that sell based on a fee schedule, usually one that has tiers, are registered investment advisors or one of their representatives. These advisors are not incentivized to recommend investments that pay a higher commission. While you may select an advisor that receives a commission, it is good to know what to be on the lookout for.

What retirement plan designations do you have?

Advisors committed to professionalism attain a specialist designation such as an Accredited Investment Fiduciary, Professional Plan Consultant, Certified Retirement Plan Specialist or Qualified Plan Financial Consultant (QPFC). These designations have continuing education requirements to keep their designees up on the latest in their field. Some firms, such as LPL Financial, have special internal screens such as the Retirement Plan Consulting Program.

Do you have personal retirement planning designations that can help my employees’ retirement plans?

The purpose of any plan governed by the Employee Retirement Income Security Act is providing retirement adequacy. Advisors with designations such as Certified Financial Planner or Chartered Retirement Planning Counselor understand the many ways to turn 401(k) savings into retirement income.

Will you share in my fiduciary responsibility or am I on my own?

This type of advisor is known as an ERISA 3 (21) investment advisor. You have one only if you have a specific document that says so. I recommend having a qualified ERISA attorney review the document to be sure it says what you believe it does.

Are the tools us use to help me monitor my retirement plan independent or ones developed by the investment company?

If your advisor has said all of this and doesn’t have tools to back up the independence claim or how they will strengthen your fiduciary toolset, I would go back to my first point. This investment monitoring report and this fee report will give you an idea of one form of an independent report.

These questions will help you know the lay of the land regarding this advisor and any others you may consider. If you choose a commissioned one that limits your investment access, be sure to do the extra work required to show your employees are getting what they pay for. If you choose an independent, with independent tools and all types of designations that doesn’t mean no work according to the Department of Labor. It should mean a much shorter list of things to be concerned about.

(1) The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. (2) Securities and Advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC. (3) The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with residents of the following states: AZ, IN, IL, MI


About Envision Wealth Planning

I empower smart people to make smarter money choices that honor their personal values. After working together to develop a holistic plan, I help clients navigate the emotions and self-expression that can derail financial wellness. I use Financial Life Planning as a tool to propel client’s values, goals, and passions forward. I help clients figure out strategies to fund and maintain a sustainable retirement, plan for funding college, manage student loan debt, balance current lifestyle with savings goals, assist with financial planning during a divorce, and align values with your investments. I have an MBA from MIT Sloan. My financial designations include Certified Financial Planner (CFP®), Chartered Retirement Planning Counselor (CRPC®), Certified Divorce Financial Analyst® and College Funding and Student Loan Advisor.
This entry was posted in 401k advisor, 401k Fees, 401k Monitoring, Fee monitoring, Fiduciary duties, Investment Monitoring, Provider monitoring, retirement plan education, Retirement planning and tagged . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s