IMHO: "Right" Minded

One of the most common—and consistent—inquiries I receive (via e-mail, anyway) is from readers looking for help in choosing a plan provider.

I am always flattered by the request, and always try to do my best to point them to the resources we have on our site (our annual  Defined Contribution Survey and the annual Recordkeeping Survey are quite popular).

Still, there is only so much help one can offer without a fuller understanding of the current needs of the program, as well as the goals and objectives set for the future. Furthermore, providers, like plan sponsors, have “personalities” and, in my experience, sometimes the chemistry that a good relationship needs to thrive just is not there, even when the plan’s needs are reasonable and the provider’s capabilities are top-notch.

Yes, picking the best provider for a retirement plan is one of the most important decisions a plan sponsor can make—both in terms of fulfilling their fiduciary obligation and in what might affectionately be called job sanity.   That said, many plan sponsors really don’t have the time—or the expertise—to pick the best provider (much less monitor that performance), and so, the smart ones do what ERISA requires—they hire the expertise to pick (and monitor) the best provider.   And that’s where the retirement plan adviser comes in.

The “Right” Adviser

However, in my experience, it’s no less challenging to find the “right” adviser/consultant than to find the right provider. In fact, IMHO, it’s harder to find that adviser.   Why?   Well, most of us have some idea as to the features/pricing we want/are willing to pay for from a provider, but how much is good counsel worth?   And how do you know it’s good counsel?  

Here are seven things that I’ve told plan sponsors that they should know before they engage an adviser’s services:

(1) Know what you want to accomplish with the adviser/why you want an adviser.   Is this for a one-time consultation, or are you looking for an ongoing relationship?

(2) Know where the adviser will be.   Do you care if they are geographically proximate, or is a phone call away close enough?   How often will they visit?   How often will they visit without charging?  

(3) 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.  

(4) Know how the adviser is going to go about doing what they say they will do. Get that in writing—and hold them accountable.

(5) 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 doesn’t diminish your responsibility as a fiduciary.

(6) Know what kind of background/expertise the adviser has.   What kind of education, honors, and/or designation(s) do they have?   How do they stay current on market and regulatory developments—and how will they keep YOU current?

(7) 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 they aren’t compensated in a way that unduly influences (or could be seen to influence) their objectivity.   If they won’t 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—perhaps the most element—trust.  

P.S. I’m sure that, in the interests of focus and brevity, I have overlooked things.   If so—or if you just want to tell me you agree—drop me a note