Magazine

Education/Advice | Published in May 2012

Guiding Hands

By PLANSPONSOR staff | June 2012

Picking the right financial adviser

Illustration by Katherine Streeter

Choosing the right retirement plan adviser can be a daunting task; it must be done with the skill and expertise of the Employee Retirement Income Security Act’s (ERISA) prudent man, after all—and it is a selection that must be monitored constantly.

This month’s Know How discusses the questions participants should ask an adviser who is seeking to earn their trust. Obviously, if you already hired that adviser for assistance with your job as a plan fiduciary, you will know the answers—or should. These questions also can help your participants beyond the workplace, to better evaluate the qualifications of any adviser they may want to engage.

Additionally, listed directly below, are five factors you, as a plan sponsor, should consider before beginning your search to retain an adviser’s services:

1. Know where the adviser is based and how his location affects his service model. Do you care if he is geographically proximate, or is “a phone call away” close enough? How often will he meet with you face-to-face?

2. Know what the adviser has done for others and what services you can expect. Get references, preferably before you contact the person.

3. Know if the adviser expects to act as a fiduciary to your plan and participants, including to offer investment advice. Know the size and strength of the organization that stands behind his commitment. Be aware that hiring an adviser who will be a fiduciary to your plan does not diminish your own responsibility as a fiduciary.

4. Know the adviser’s background and expertise. What education, honors, designations and/or other credentials does he have? How does he stay current on market and regulatory developments—and how will he keep you current?

5. Know how much—and how—you will be expected to pay the adviser. Verify that, when the adviser is paid for the services rendered your plan, he will not be compensated in a way that unduly influences (or could appear to influence) his objectivity. If the adviser is vague on this point, no matter how qualified he may seem, 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 with any important relationship, it pays to put effort into finding a good match.