Are You Getting Enough from Your Adviser?

February 3, 2014 ( – Small retirement plan sponsors may not be getting the services from an adviser they need.

Just fewer than half of plan sponsors do not think they are getting good value for their plan, says Stephen Davis of Guardian Retirement Solutions. It’s a surprising statistic, but, “they’re out there, and they’re looking for help,” Davis tells PLANSPONSOR.

In the micro plan market (less than $5 million in assets, and fewer than 100 participants), plan sponsors face a number of challenges to running a plan. Employers in this market should be sure that they are getting the best service from an adviser.

Small plan sponsors rarely have the luxury of a separate committee. Instead of a treasurer, HR person, chief financial officer, it’s just one person, Davis says. The adviser can provide a great deal of value helping the employer sort through the tasks that a committee would handle, such as how to leverage the different service providers and helping them figure out how a relationship manager can help with employee education.

The adviser can help the plan sponsor determine if fiduciary support is needed, and what kind, whether the demographics of the company point to a combination of 3(21) investment adviser and 3(38) investment manager services, or just 3(21) service. The adviser who is a good, active listener can act as a sounding board to the plan sponsor the way a committee does, Davis says.

In the micro plan market, there has been a slow uptick in the use of auto features, Davis says, such as auto enrollment and auto increases. “Small-plan sponsors are likelier to want a do-it-for-me approach, which can work well with auto features,” he says.

However, Davis points out, plan sponsors are still challenged by the census information they need to supply for auto features to work–data such as participant dates of birth, hours worked and salary for the time period–which can account for some slowness in adopting these features.

Better Service

Plan sponsors can scout several ways to get better service from an adviser, Davis says.

Good advisers are typically supported by fiduciary support providers and relationship managers. The adviser should remain in constant contact with the plan sponsor. In large plans, the adviser sits down twice a year or more with the plan sponsor to go over investments and participation data. “In the small market it’s almost the reverse,” Davis says, with some small sponsors telling the adviser not to be in touch unless something is broken in the plan.

An adviser should make sure the plan sponsor sits down for an annual plan review, Davis says. The review should be easy to read, and the meeting can take place with just plan sponsor and adviser, or the adviser can bring along the relationship manager from the plan provider(s). The annual review is a way to solidify the relationship, Davis says, while identifying any pain points in the plan. Are certain demographics investing too aggressively or too conservatively? Could participation be improved? Something is going to come up in the plan review that needs to be worked on.

A key determinant of plan success is participation. Plan sponsors should determine if the plan adviser is active in educating employees and truly helping to drive participation. Many small advisers do not want to take on the fiduciary management services of a plan— it’s just not efficient for small practices. In that case, the plan sponsor should assess the level of help the adviser gives in helping manage fiduciary responsibility, by suggesting 3(21) and 3(38) providers.

The plan sponsor should assess whether the adviser is helping the business have the best possible plan, and whether the plan is the right one. In some small businesses, the retirement plan helps the business owner build personal net worth, and can be a wealth builder in case someone has not established a lot of value in preparation for a sale, Davis says.

A good adviser provides communication and participant education, either from the practice or through a relationship manager who can also design an education policy statement and help support it. “Education policy statements are becoming more common,” Davis says. The adviser can help the plan sponsor craft the statement, but may do so using the services of a relationship manager or other staff from the plan provider(s) or a third-party administrator (TPA) to help staff meetings.

“One out of two people with a plan has a headache,” Davis says, but there are ways to improve both the plan and the service from an adviser.