KnowHow Archive

Plan Sponsor Guide Participant Guide

Question "Air"

Question “Air” Picking the right financial adviser

Illustration by Christopher Nielsen

Choosing the right retirement plan adviser can be a daunting task; it must be done with the skill and expertise of ERISA’s prudent person, after all—and it is a selection that must be monitored on an ongoing basis.

This month’s Know How focuses on questions that participants should ask an adviser who seeks to earn their trust. Obviously, if that adviser has been hired by you to assist you in your job as a plan fiduciary, you will know the answers, or should be expected to. These questions also can help your participants outside the workplace, as advisers seek to gain their confidence, as a means of better understanding what they might be getting into.

Additionally, for your benefit, I have listed here things that I have told plan sponsors­ that they should know before—and, in some cases, know before they start looking—they engage an adviser’s services:

1. Know where the advisers will be. Do you care if they are geographically proximate, or is a phone call away close enough? How often will they visit?

2. Know what the adviser has done for others. Get references—in fact, if you can get references first, and then call the advisers, so much the better.

3. Know where the adviser stands on the issue of being a fiduciary to your plan. Know the size and strength of the organ­ization that stands behind that commitment. Know that hiring an adviser who will be a fiduciary to your plan does not diminish your responsibility as a fiduciary.

4. Know what kind of background/expertise the advisers have. What kinds of education, honors, and/or designations do they have? How do they stay current on market and regulatory developments—and how will they keep you current?

5. Know how much—and how—you will be asked to pay for the adviser. More importantly, know how much—and how—the adviser is paid for the services provided to your plan. Be sure that he is not compensated in a way that unduly influences (or could be seen to influence) his objectivity. If advisers will not answer this question, no matter how good they seem to be, walk—no, run—away.

Of course, ultimately, the choice of the “right” adviser will be a combination of personal chemistry, professional acumen, relevant experience, and trust. As always, I hope you—and your participants—find this information useful, and I look forward to your feedback.

Nevin E. Adams