Why You Need To Consider Retirement Plan Advisor Due Diligence

By Trisha Brambley, Founder of Retirement Playbook, Inc.™

Today, 75% of Plan Sponsors use the services of an Investment Advisor for their retirement plan[1]. Many of these plans (up to 75%) do not have a specialized Retirement Advisor while others may have outgrown the Advisor they do have. The providers too are seeing an increase in companies looking for that “best fit” Advisory Firm. A high quality firm can offer outstanding investment and retirement plan expertise. Plan Sponsors are looking for more from their advisors than ever before. Many want a more knowledgeable and specialized retirement advisor, or are looking for help supporting their employee education program or want help minimizing costs[2]. Committee members think about changing advisors as their plan, or need for help, grows. For these reasons, many Plans Sponsors embark on a due diligence process to find the best advisory firm for their plan and their employees.

Companies that use a qualified Retirement Plan Advisory Firm can experience greater satisfaction with their plans through improved plan performance, a better understanding of their fiduciary responsibilities, and better support for participants. However, a number of plan sponsors feel dissatisfied with their Advisory Firm if they are running their plans without the needed expertise and technical knowledge a quality Retirement Plan Team brings to the table.

If you serve on a plan committee and are considering adding an advisor or replacing one, you will want to delve into the details to ensure you get the best possible fit for your plan. Here are some of the points we recommend exploring when considering a plan advisory firm:

  1. All advisors are not fiduciaries. Since 2008, fiduciary concerns have nearly tripled[3]. Find out if your Advisor is ready to take on the co-fiduciary role. Often, we will find some investment plan committee members who think their plan vendors will automatically assume the company’s fiduciary liability. Also, do not assume that your broker is a fiduciary, because in many cases they are not. If your advisor is qualified to serve as a co-fiduciary, get it in writing.
  2. Advisors are either specialists or generalists. According to the Retirement Advisor Council, 75% of plans between $5 million to $500 million do not use an Advisor who specializes in retirement plans. Some of these plans do not have an advisor at all and the rest are using generalists. A retirement plan specialist can round out the needs of the investment committee. They can provide the committee with ideas on Best Practices, can alert the committee to trends and ideas, and even offer influence with your plan vendor for handling special requests or pricing that you would like to have. We have found that regardless of plan size, the committee members value the retirement expertise that a specialist can bring to the table and increasingly demand these skills.
  3. Learn where potential conflicts of interest lie. Does the advisor get special bonuses based on how much business they place with certain firms or funds? Does the firm have preferred vendors because they receive additional compensation? Does the firm have a policy on receiving gifts of any kind from the vendors and companies they do business with?
  4. Make sure all fees are reasonable—including the plan advisor’s fees. If the advisors’ fees are taken from plan assets, you need to be sure that the fees are reasonable in context of the services provided. Surveys can be a good starting point. However, there is no substitute for a periodic structured process to determine the best price for the best services. Just as you do a periodic review of your plan vendor’s fees, it is a Best Practice to shop for these services every three to five years.
  5. Understand how the plan pays fees. New, more stringent retirement plan fee disclosure rules make attention to this detail mandatory. Advisors may charge a percentage of assets or a flat fee through an ERISA expense budget or as an add-on.
  6. Question advisory firms about capacity and resources. Your advisor may work for a firm with thousands of employees. This doesn’t mean the firm has the professionals your plan requires. Ask how many professionals are exclusively Retirement Plan specialists for plans of your size. How many are dedicated to your plan? It is important to take a close look at the actual team (and their credentials) that will be servicing your plan. Is the advisory firm growing and how will they manage that growth?
  7. Find out if your advisor has influence. Top advisors have significant influence with service vendors and can help you get the best pricing and service for your plan. Advisory firms that are growing can often help the plan sponsor when negotiating fees and services on their behalf.
  8. Choose candidates who talk to you. Some plan advisors may talk at you—or over your head. The world’s most knowledgeable advisor should still communicate to you in plain English. The people who serve on investment committees are not necessarily professionals with an expertise in investments. The advisors you rely on need to be able to communicate complex financial matters in understandable terms to help you make informed decisions about the plan.
  9. Check their insurance. A detailed review of the advisors’ fiduciary liability insurance and Errors and Omissions coverage is critical in determining their suitability for your plan and your company.
  10. Check all candidates’ background, professional credentials and experience. A thorough review includes a background check on the advisors who will work on your plan. That includes getting details on their credentials, experience, ADV filing, and bankruptcies, criminal charges, liens and more.

The Plan Sponsor’s choice of a retirement plan advisor is one of the most important plan related decisions that can be made. A thorough, periodic review can yield better protection for the company and the committee members, better service from the vendor and better techniques to get the participants ready for retirement.


1. Retirement Advisor Council
2. Fidelity Investments 2012 Biannual Plan Sponsor Attitudes Survey
3. Fidelity Investments 2012 Biannual Plan Sponsor Attitudes Survey