Narrow the Search for your Retirement Plan Advisor by Focusing on These Four Factors

Daniel Tatomir

February 21, 2024

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A common assumption when hiring a retirement plan advisor is that his or her main role is to choose the best performing funds for the plan’s investment lineup. Choosing good investments is important, but a good retirement plan advisor should bring much more to the table. Not all financial advisors specialize in retirement plans and have the expertise to properly guide plan sponsors with the decisions they face in establishing and running a retirement plan.

1. Plan Design

A well-designed retirement plan will work toward the goals it was originally set up for. A well-administered plan will allow employees to effectively save for the future without adding excess burden to plan sponsors. The design of a retirement plan often dictates how successful a plan will be at meeting its intended goals. Businesses evolve and workforce demographics change over time, and therefore, the design and chosen provisions of the plan need updated accordingly. An advisor that specializes in 401(k) and 403(b) plans has the knowledge and expertise to guide plan sponsors and help ensure the plan is designed appropriately.

Plan design questions to ask when hiring an advisor:

  • Are you a 401(k) and 403(b) plan specialist or are you an individual advisor foremost who additionally does retirement plans?
  • How have you helped your clients with the design of their plan?

Accredited By:

Daniel Tatomir
Vice President Retirement Plan Services & Business Exit Advisor
Daniel Tatomir
CExP®, AIF®

Dan brings more than 25 years of industry experience helping organizations design and manage effective retirement plans. Dan specializes in employer-sponsored retirement plans for private companies and nonprofit organizations, partnering with plan sponsors to align plan design, provider selection, and investment oversight with the organization’s goals and fiduciary responsibilities. Working closely with Fragasso’s portfolio management […]

Read Full Bio

This article has been reviewed for accuracy by Fragasso's leadership team and accredited by Daniel Tatomir to help ensure the information reflects current financial planning and wealth management principles.

2. Investment Selection and Monitoring

Selecting the plan’s investment lineup starts with establishing an Investment Policy Statement (IPS). This document provides the framework for all investment related decisions made in the plan such as who is involved in decision making, what type of investments will be included, what criteria does a fund need to be considered, and for what reasons could a fund be replaced in the lineup?

An IPS helps prove that a prudent process is being followed, and it provides protection for both plan sponsors and fiduciaries. A retirement plan advisor should be willing to serve in a fiduciary capacity – not all advisors can or will do so – and preferably in a 3(38) fiduciary capacity, which offers plan sponsors the most protection from investment-related liability.

Investment-related questions to ask when hiring an advisor:

  • Would you help develop or review an Investment Policy Statement (IPS)?
  • Will you act as a 3(21) co-fiduciary?
  • Will you act as a 3(38)-investment manager and take on additional investment liability?

3. Employee Education

Providing education to employees is a fiduciary obligation of a plan sponsor. The best way to help employees use the plan is to hire an advisor that educates employees on the importance of savings, the benefits of the plan, and how best to use the plan overtime to support retirement goals.

Employee education questions to ask when hiring an advisor:

  • What is your experience helping plan participants understand their options, benefits, and how to make necessary changes?
  • How will you provide investment education for plan participants?
  • How often can employees reach out to you?

4. Fee Benchmarking

Plan sponsors have an obligation to review and understand the expenses of the plan to ensure they are reasonable. Retirement plan fee disclosures have improved, but it can still be difficult to gain a clear picture of the fees being charged, who is charging them, and who is paying the fees. Plan-related costs can be embedded in investment management fees making it harder to understand the overall cost structure. An independent retirement plan advisor is familiar with plan fees, expenses, and revenue sharing from plan providers. They can benchmark your plan against other service providers to show exactly how your plan stacks up.

Fee-related questions to ask when hiring an advisor:

  • How often do you review fees of the plan’s fund managers and recordkeeper?
  • What is your process for ensuring investment fees are “reasonable” as mandated?
  • What fee benchmarking tools do you use?

Offering a 401(k) or 403(b) is an employee benefit that can help attract and retain top talent and allow your employees to save for retirement feeling more secure about their financial future. Selecting an advisor that specializes in employer retirement plans can give plan sponsors more confidence that the plan is set up appropriately for the company and employees. An experienced advisor will help make administration of the plan more efficient and in a way that fulfills regulatory and fiduciary requirements. If you have not had a thorough review of your retirement plan, or have questions on how it could be improved, we would welcome a conversation.

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