How to Choose a 401(k) Advisor for Your Business

A 401(k) plan can stay with the same providers for years, even as the business changes around it. Over time, employers may find that the level of service they once accepted no longer fits what they need from an advisor.

That service can affect much of the experience of running a retirement plan. A 401(k) advisor may help monitor investments and review plan fees. They may also coordinate with service providers or educate employees about the benefit.

Whether you are reviewing an existing relationship or choosing an advisor for a new plan, a few key questions can help you understand what you will actually receive.

What a 401(k) Advisor Does for a Business

Service models vary considerably. A retirement plan advisor may help with:

• Selecting and monitoring the plan’s investment lineup
• Benchmarking plan fees against comparable plans
• Coordinating with the recordkeeper or third-party administrator when questions arise
• Reviewing plan design
• Providing enrollment meetings and employee education
• Preparing materials for annual plan reviews
• Helping the employer stay informed about regulatory changes that may affect the plan

Most of this work continues long after a plan is established. That makes the ongoing service model an important part of evaluating an advisor.

Ask how often the advisor will meet with you and what support is available between scheduled reviews. You should also understand how involved the advisor will be when an issue requires coordination with another provider.

Understand the Advisor’s Fiduciary Role

Another important question is whether the advisor will serve in a fiduciary capacity and what that role includes.

An advisor serving as a 3(21) investment fiduciary generally provides investment recommendations while the employer retains decision-making responsibility.

A 3(38) investment fiduciary generally assumes discretion for selecting and monitoring the plan’s investment lineup within the scope of the engagement.

These arrangements assign investment responsibilities differently, but the employer continues to have responsibilities as a plan fiduciary. Ask the advisor to explain their role in writing and show you where it is addressed in the service agreement.

The fiduciary designation is an important consideration, but it should not be the only one. The advisor’s accessibility and level of ongoing support can have a significant impact on the employer’s experience.

Questions Worth Asking in a First Meeting

A few questions can quickly show you how an advisor approaches retirement plan service:

• How many retirement plans do you currently serve and what types of employers do you typically work with?
• What fiduciary capacity will you serve in and where is that documented?
• How are you compensated?
• How often will you meet with our employees?
• What does employee education look like?
• Who will our HR team contact when a question comes up?
• How often do you benchmark plan fees and services?
• How do you coordinate with our third-party administrator and recordkeeper?
• What would the transition process look like if we decided to work with you?

Pay particular attention to the answers about accessibility and employee support. A plan may look fine on paper while HR is still spending too much time tracking down answers. Employees may also have little contact with the advisor outside of enrollment. Understanding what happens between annual review meetings can tell you a great deal about the relationship you are considering.

What an Annual Plan Review Should Cover

An annual review should help the employer evaluate how the plan is working and document the decisions being made.

Depending on the plan, the review may address investment performance or plan fees. It may also include participation trends, compliance testing results or possible changes to the plan’s design.

The advisor should help document the discussion and any decisions that follow. These reviews can uncover issues that are easy to miss during day-to-day administration. For example, participation may be lower than expected. In other cases, the current match may no longer support the employer’s goals.

The value comes from using the review to identify what deserves attention rather than treating it as an annual formality.

Look at How the Advisor Works with Your Business

Retirement plans have to work within the way a company operates. That makes the advisor’s service model especially important.

An employer with employees spread across multiple job sites may need more hands-on enrollment support. A company with a small HR team may place greater value on an advisor who takes an active role in coordinating questions with the plan’s other providers.

CoSource Financial Group works with employers throughout South Louisiana. With offices in Lafayette, New Iberia, Thibodaux and New Orleans, our team provides local support to businesses managing workplace retirement plans. When engaged to do so, CoSource also serves as an ERISA 3(38) investment fiduciary.

For our team, retirement plan service means understanding how the employer operates and being available when questions arise throughout the year.

Frequently Asked Questions

What Does a 401(k) Advisor Cost?

Advisor fees may be structured in several ways. Some are based on plan assets, while others use a flat annual fee or a per-participant fee. Depending on the arrangement, fees may be paid by the employer or the plan. When comparing fees, ask what services are included so you understand what you are receiving for the cost.

Can We Change 401(k) Advisors and Keep Our Current Recordkeeper?

In many cases, yes. The advisor and recordkeeper may have separate service arrangements, allowing an employer to change its advisor without replacing the entire plan platform. Review the applicable service agreements to understand the process and any notice requirements.

How Often Should We Review Our Plan’s Fees?

There is no single schedule that fits every plan. Employers should review fees periodically and consider another review when the plan changes significantly. The important question is whether the employer can document a process for evaluating whether plan fees remain reasonable for the services being provided.

Does a Small Business Need a 401(k) Advisor?

Small employers can face many of the same retirement plan decisions as larger companies, often with fewer internal resources available to manage them. An advisor can help the employer understand its responsibilities and coordinate with the providers involved in the plan. Some employers may also consider alternatives such as a pooled employer plan depending on their needs.

How Do We Know if Our Current Plan Is Competitive?

A benchmark review can compare your plan with plans of similar size and design. It can help you evaluate fees and determine whether the current service model still fits your business.

Request a Benchmark Review

CoSource Financial Group offers a complimentary, no-obligation review of your retirement plan’s fees and services. We can compare your plan with others of similar size and design, review the current service model and provide a written summary for your leadership team.

To request a review, call (337) 606-9860 or email info@cosourcefinancial.com.