IMHO: The Best Test

September 8, 2005 ( - The pages of this publication frequently chronicle the impending onslaught of change and its implications for plan sponsors, and we also hope we provide readers a forward-thinking perspective on trends and opportunities, as well as threats.

A constant theme in these pages, certainly over the past five years, has been not only the high standard to which fiduciaries are held in their actions, but also the difficulties associated with living up to that standard.

Plan sponsors understandably rely on experts to assist them in their Herculean task, and ERISA contemplates that reality. Unfortunately for plan sponsors, the standards in selecting and monitoring, on an ongoing basis, the skills and actions of those experts can be almost as daunting as the underlying activities themselves.

In the midst of these challenging times, financial advisors have become a ubiquitous element in many markets. Absent their presence, many small-plan sponsors might still lack access to a respectably priced retirement plan, and the in-person delivery of education and advice to plan sponsors certainly would suffer across the board. Providers also benefit from the cost-effective delivery of services to places that are far-flung, and perhaps ill-served by distant call center support.

Unfortunately, plan sponsors have little to go on in evaluating a financial advisor before the fact. The geographic diversity that is their strength also serves to thwart a ready assessment of their skills. Their service is delivered to a finite group of plan sponsors, rendering statistical evaluations challenging at best. Over the years, plan sponsors have repeatedly asked me for recommendations on financial advisors but, up until recently, I’ve been hard-pressed to provide any suggestions.

A year ago, PLANSPONSOR announced its inaugural Retirement Plan Advisor of the Year award. That award was designed to recognize “the contributions of the nation’s best financial advisors in helping make retirement security a reality for workers across the nation.” While we looked to experience, commitment to the business, education, and employer referrals, at the outset, we wanted the award to focus on objective criteria that made an impact on ensuring retirement security. More specifically, we looked for evidence of increased participation rates, enhanced rates of participant deferrals, improved asset allocations, and either reduced fees or expanded service levels—the criteria that have, for years, been most highly sought by plan sponsor respondents to our Defined Contribution Survey.

During the course of the RPA evaluations, we were impressed by stories of plan participation rates that jump 20% to 30% in a six-month period; participants that have, in many cases for the first time, “rational” asset allocation choices; investment committee members who, for the first time, not only regularly attended investment review meetings, but also looked forward to them; and the extraordinary measures taken by advisors to ensure that even relatively small 401(k) plans gain an audience with the heads of mutual fund complexes tainted by the trading scandal. Ultimately, more than 200 advisors nationwide were nominated. A listing of the 25 “Most Successful” advisors in the November issue of PLANSPONSOR represented nearly $45 billion assets under advisement.  

Moreover, our experiences there taught us also that even the best advisors—and perhaps especially the best advisors—not only rely on our publications to do so, but also are always looking to keep those skills honed. Earlier this year, we launched the PLANSPONSOR Institute and, now, nearly 170 financial advisors, and sales and servicing professionals have attained the PLANSPONSOR Retirement Professional (PRP) designation (a listing is online ). Now, thanks to that program, when plan sponsors ask about financial advisors, we can offer you a resource.  

This week  we launch our second annual RPA award and, once again, seek your help in identifying the best and brightest in the space—because, in the final analysis, the best test of a financial advisor’s skills is the way in which he or she helps you fulfill your responsibilities to your participants.

Editor’s Note: The nomination form for the Retirement Plan Advisor of the Year is online

—Nevin Adams

Regarding the Retirement Plan Advisor of the Year Award.

The award drew the nominations of nearly 200 financial advisors in 2004, its inaugural year.   A listing of the 25 most successful financial advisors drawn from those nominees and published in the November 2004 issue of PLANSPONSOR magazine represented nearly $50 billion in retirement plan assets under advisement.   Once again, the award will be presented at the leading assembly of top 401(k) investment and sales professionals, The 401(k). The fifth annual conference is being held at the Orlando World Center Marriott in,, February 26 – 28, 2006.

The award is based on a series of qualitative and quantitative measures, including input drawn directly from plan sponsors whose programs benefit from advisors’ services.   Quantitative measures will include the ability to demonstrate an impact on plan participation, deferral rates, cost savings, and/or service enhancements.  Nominations for Retirement Plan Advisor of the Year are currently being solicited online from qualified retirement advisors, their employers and/or broker-dealers, and plan sponsors, as well as from working partners of these retirement advisors, including investment vendors, accountants and attorneys, and pension administrators.   The deadline for nominations for this year’s award is October 1.  

PLANSPONSORwill produce a special feature on financial advisors in its December issue, which, among other advisor-oriented topics, will include profiles of semi-finalists for the Retirement Plan Advisor of the Year award.   Finalists will be featured in a special “Best Practices” panel at the 401(k).