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
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
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
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.