What to Look For in an Advisory Relationship

Plan Sponsor of the Year award recipients discuss what they expect, and receive, from their advisers.

Several PLANSPONSOR Plan Sponsor of the Year (PSOY) award winners and finalists joined the virtual 2021 PLANADVISER National Conference (PANC) for a panel discussion on navigating advisory and recordkeeper relationships.

Plan sponsors listed their best practices when searching for new financial advisers and recordkeepers, as well as their key priorities when working with both groups.

Valerie Burns, human resources (HR) director for Iowa Fluid Power (IFP) Group of Companies, a 2021 PSOY finalist, started the discussion by explaining that her company has been working with its adviser since 2012. The HR team conducted a formal request for proposals (RFP), then narrowed its list of competing advisers down to two before selecting its current adviser. Burns and her team conduct an RFP every five years, which she said is standard to industry best practices.

When asked what her top features are for selecting an adviser, Burns listed a number of services, including the frequency of education. She said she asks “Do they run a quarterly review [on services]? Do they offer training? What do they offer outside of 401(k)s? Do they offer financial wellness?

“Our advisers are really good about reviewing and working with clients—they answer any questions, benchmark our fees, and they’re wonderful with one-on-ones. They can meet with someone online or in-person,” Burns continued.

Engagement with participants is a crucial element when selecting an adviser, Burns added. For example, while participants can log into their financial wellness site and enroll in a new offering, advisers who work with IFP will also reach out to explain the service and answer participant questions, Burns said.

Linda Fraise, payroll manager at Barilla America, a 2021 PSOY finalist, has been working with the company’s current adviser since it was hired in 2018. “Our goal was to see how their services add value to what we offered for our employees,” she said during the panel. “We also wanted more of that one-on-one.”

Outside of evaluating services and cost, Fraise said Barilla America also makes sure its advisers and recordkeeping partners hold quarterly meetings. One of Barilla’s requirements is that the adviser and recordkeeper attend their quarterly meetings together because, she said “we like the transparency when working with investments.”  

Sharon Kacsits, director of HR for COFCO International USA, a 2021 PSOY winner, agreed, adding that her company requires all parties to attend meetings together. COFCO’s adviser also takes on a portion of the company’s fiduciary responsibility, a practice that she believes guards small businesses such as COFCO from liability.

During the RFP process, Burns said her firm had advisers come in and meet with the company’s workforce, including C-suite executives and employees. Burns said she credits this action with helping the company to find a good fit, noting that it wanted to see how an adviser would relate to its employees.

Kacsits touched on the importance of meeting prospective advisers before signing a contract. “You need to have someone who understands the participant—having that patience to field through and hear what they’re saving,” she said. “You want the person to work well with the people that you currently have.”

Having consistent communication with an adviser is important as well. Kacsits and Burns speak with their advisers and recordkeepers weekly, while Fraise said she speaks with the company’s recordkeeper every other week and communicates with the adviser on a monthly basis.

When monitoring advisers, Burns suggests asking participants for feedback to get their thoughts on the provider. IFP also tracks its participation and deferral rates with advisers.

Kacsits recommends reviewing metrics during quarterly meetings. At Barilla America, the company re-evaluates its adviser and recordkeeper relationship after their contracts are up, or after three years.

“We look at the funds and see if we’re on track,” Fraise said. “If we see some major drops, that would raise an eyebrow. If that doesn’t change, we look at the co-fiduciary relationship and how that is working out.”