The Importance of Having a Plan Advisor

Trying to develop and maintain complex retirement plans in a constantly evolving legal and regulatory space is difficult. Working with an advisor or consultant provides plan sponsors with the services necessary to ensure their plans are performing legally and efficiently, and enables them to spend more time on their core business objectives.

In this article, we highlight a few of the key areas in which plan advisors can provide services critical to a “well-oiled” retirement plan.

Compliance and Limiting Liability

A retirement plan advisor or consultant works with the plan sponsor to establish and maintain plan governance and design that meets the specific goals and objectives of the individual company or institution. Retirement plan advisors and consultants with a fiduciary duty toward clients offer the most desirable traits for any retirement plan, including independence, qualified experience, and marketplace knowledge. These qualities provide the benefit of evaluating funds and providers objectively, without conflict of interest.

Utilizing the services of a plan advisor may minimize risks from lawsuits or huge losses by ensuring that the plan is properly administered. ERISA (the law governing 401(k) plans) is a process intensive law. The best way to stay in compliance with the law is to have a solid understanding of those processes.  But rigorous retirement rules and regulations can cause confusion among 401(k) plan sponsors. Advisors can bring value to plan sponsors by providing guidance on ERISA regulations and ensuring the 401(k) plan remains compliant.

Employee Education

An advisor must engage with participants not only to get them to enroll in the plan, but also to advance their financial literacy. Plan sponsors are placing greater emphasis on an advisor’s participant education program. Many employees are overwhelmed when it comes to finances, so more companies want advisors to be able to provide financial wellness programs. Plan advisors can educate employees about retirement saving, their investment options, potential benefits, and how to make changes. Providing education is an important step in encouraging participants to stay engaged with their retirement goals. This education process can also benefit plan sponsors, as common questions asked by participants can be relayed to the sponsors by the advisors.

Plan Review

It is essential to review more than one investment option when starting a new retirement plan, but most plan sponsors lack the industry expertise required to make well-informed decisions. Financial advisors can evaluate the market, keep up with industry changes and trends, and transparently discuss plan fees.


While still an important consideration, the cost of a plan advisor’s services is not the most crucial element in determining whether a particular plan advisor is appropriate. Since sponsors frequently cannot spend time debating the benefits of particular funds, sponsors can give an advisor discretion over the investments in the plan (typically for a higher advisory fee).  A properly functioning advisor can find the right balance between providing the sponsor with necessary information concerning developments in the economy and markets generally so the sponsor and other corporate executives can focus on their jobs.  This strategy also permits sponsors to spend more time talking about investment strategies, less time talking about the specific investments, and avoids monopolizing executives’ time.

Advice/Consultation/Team Approach

Plan advisors are frequently seen as a vital extension of the retirement plan committee. They are expected to act as proactive corporate consultants providing solutions to problems the investment committee may not even know it has  versus vendors sharing product information. Plan sponsors expect plan advisors to advocate for their positions and, where appropriate, challenge and question their or the investment committee’s perspectives. As critical as this open communication may be, plan advisors need to decide how to balance discussing these matters with a sponsor or committee, and when to make decisions proactively.

Advisors must also communicate fact-based rationale for their fund recommendations that can be justified and tracked. Such an approach reduces the appearance of subjectivity and helps ensure the investment process is tied to the corporation’s policy statement.

Proficient plan advisors help plan participants achieve their retirement outcomes, while assisting plan sponsors in managing the challenges associated with offering a defined contribution plan and other employee benefits. Beyond possessing the ability to competently perform the above-outlined tasks, any plan advisor under consideration for hire must be one with whom the plan sponsor, and, ideally, members of the various committees serving the plan can establish a good working relationship.