What is My Advisor Getting Paid to Do?

What is My Advisor Getting Paid to Do?

May 08, 2020
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What is My Advisor Getting Paid to Do?

Every plan sponsor should be asking themselves this question periodically. You wouldn't believe how often people ask this very question, "What exactly is my advisor getting paid to do?" I tell them, “I won’t know until we review your service contracts.” Service contracts can tell us what the advisor should be doing. Whether or not he or she is following through is a different story. An experienced advisor can be an asset to a plan sponsor. Such a professional can be a trusted advisor.  

Advisor Evaluation Coming From a 401k Advisor

There are a number of resources out there that can be helpful in getting some background about advisors you are looking into. There are also rules and regulations about advisors giving and receiving endorsements. I don’t know of any one resource that gives everything you need to know about advisors out there, but the FINRA and SEC website can be a great place to start. 

Look him/her up on https://brokercheck.finra.org/ and/or https://adviserinfo.sec.gov/individual 

 - What Licenses does your advisor have?

 - How long has he/she been doing this?

 - Are there disclosures on their record?

 - What does his/her work history look like?

Is Your Advisor Able to Act as a Fiduciary On Your Retirement Plan?

 - Not all financial professionals have the ability to act in a fiduciary capacity.

Does your advisor have credentials specific to the retirement plan industry?

- There are many different types of credentials out there. FINRA has a tool to look up credentials.This helps you understand what company or organization gives out the credentials and what the requirements are to receive them. https://www.finra.org/investors/professional-designations

Services I Would Look Into in an Advisor (Coming From an Advisor)

Here are services 401k advisors can offer. Advisors may be limited to the services they are allowed to offer, depending on their Broker-Dealer or Investment Advisory Firm:

Fiduciary Services

  • 3(21) Investment Advising
  • 3(38) Investment Management
  • 3(16) Fiduciary Support

Investment Support

  • Investment Monitoring
  • Investment Policy Statement formation and reviews
  • Support Investment Committee Meetings

Benchmarking

  • Plan Performance Reviews
  • Platform Benchmarking
  • Fee Benchmarking
  • Services Benchmarking

Education

  • One-to-one participant education
  • Prepare participant education calendars
  • Provide education meetings
  • Help provide fiduciary education

General Knowledge

  • Help educate on options for plan structure
  • Help provide insight into different recordkeeping options
  • Recommend TPAs
  • Provide insight on trends

Interview

I am a big proponent of interviewing multiple advisors and companies to see who is the best fit for your plan. When you let multiple professionals compete against each other, you get to see who knows their stuff. Be careful not to bargain shop though. Cheap isn’t always good.

Final Thoughts

You don’t necessarily need an advisor who provides every service out there. You should look for an advisor who provides the services you need. It’s important to do your research and find the right professional. Consider shopping multiple professionals. At CUI Wealth Management, one way we can help is with our Second Opinion Service. Feel free to reach out to us to utilize this service.