401(k) Financial Advisors: What Are Their Core Responsibilities?

November 14, 2017 by Alex Goldberg
401k Financial Advisor at work

While a 401(k) financial advisor is not required to offer a company-sponsored retirement plan, a competent one can really help in several key aspects. They not only take work off your plate, but can also reduce your liability by acting as a fiduciary.

401(k) Financial Advisor Responsibilities

Helpful 401(k) financial advisors can take on any or all of the following responsibilities:

  • Develop the plan documents and consulting on plan design
  • Select recordkeepers and TPAs, including running RFP processes if required
  • Act as an investment manager who selects and monitors the plan’s mutual fund investments. Depending on the relationship, that 401(k) financial advisor may or may not be a fiduciary. (Read about the difference between a fiduciary and a broker here, and about 3(38) fiduciaries here)
  • Provide advice and answer compliance questions
  • Assist employees in 401(k) investment selection and financial advice
  • Make your life easier by giving you and your staff more time to focus on your business
  • Provide a 3(16) fiduciary who takes on plan administration services and signs the Form 5500
  • Assist with annual large plan audits and Department of Labor audits
  • Provide technology enabled 401(k) financial advisors that will integrate your 401(k) recordkeeper to your payroll system, reducing your administrative workload

At ForUsAll we understand that evaluating all the moving parts to a 401(k) plan can be daunting. That’s why we have created several tools to help you compare 401(k) financial advisors for your plan. We think the best approach to identifying quality consultants is to make sure all candidates meet certain key requirements. Then, those who make the cut can be evaluated more rigorously. Use the resources below to help evaluate financial advisors for your organization’s retirement plan (and make sure they are able to complete their essential duties!)


401(k) Financial Advisor Evaluation Tools

401(K) Advisor Checklist

Why not start with our 401(k) Advisor Checklist? This tool can let you rule out providers who are a poor fit for your growing business, and help you quickly identify a shortlist of providers who meet your minimum requirements. The checklist will help you organize your research without requiring you to schedule face-to-face interviews. The checklist ensures that you will ask the right questions to help you know how much work you’ll take on internally, and how much you’ll want to delegate to an external partner. It addresses the five key areas essential to running a quality 401(k) plan:

  • Degree of investment help and education for employees
  • Costs – including average fund fee and breakdown of all other costs.
  • Compliance work performed. Does the 401(k) financial advisor sign the Form 5500? Are they a 3(16), 3(21) or 3(38) fiduciary? What does an annual audit cost?
  • Employee experience – Is automatic enrollment provided? What are the average participation and deferral rates?
  • Administrative work – Do they offer payroll integration? Track employee eligibility? What testing does the provider perform?

We believe that at a minimum any new provider should offer payroll integration, provide a 3(16) fiduciary to sign your Form 5500, and provide employees with access to investment experts. (For more tips on how to use the checklist see our blog post, “401(k) Provider Shopping Guide.”)

401(k) Advisor RFP Template

Once you’ve narrowed your list of potential 401(k) financial advisors, ask them to complete our 401(k) RFP Template. This more comprehensive questionnaire includes sections to be completed by each financial advisor regarding recordkeeping and plan fees, fiduciary responsibilities, the scope of their administrative duties, as well as their experience serving 401(k) plans. In the final section, we at ForUsAll complete the same RFP so you can compare our services against others vying for your business.

In the section on the 401(k) financial advisor’s background, we suggest obtaining information on the size of clients typically served. If a financial advisor primarily handles very large plans, your small business may require a level of service that they are not accustomed to providing. Conversely, if they typically only provide private wealth management, then they may not have the expertise to help safely administer a 401(k)

The fee section of the RFP allows you to understand all of the hard dollar costs the 401(k) financial advisor will charge. Be sure to understand if the plan sponsor or the participants will pay each particular charge. Information from this breakdown will allow you to compare costs across vendors.

In the section examining fiduciary responsibilities, be sure to know if the 401(k) financial advisor is a 3(21) investment fiduciary. If so, that means you remain on the hook for the liability associated with the investments in the plan. This RFP also helps you document other areas of fiduciary oversight. For example, does the advisor determine employee eligibility or monitor payroll contributions? You will know after reviewing the completed RFP.

The RFP even has a section to help you understand how the 401(k) financial advisor would assist your employees with their 401(k). Effective employee engagement can be critical to ensuring widespread participation in the plan along with hefty high salary deferrals.

Speaking of participation, be sure to note the participation and savings rates of the average client.  This is critical information that can help you determine if an advisor is a good fit for your company’s 401(k).

Already have a 401(k)? How does your current 401(k) financial advisor measure up?

If you already offer a company 401(k) you may wonder how it stacks up against other plans. Regularly benchmarking your plan is critical to remaining compliant, but it also can alert you to shortfalls that may need addressing. After a thorough benchmarking, you may discover you want to consider other providers.

Just as when hiring your first 401(k) financial advisor, it can be difficult to know where to start “benchmarking.” At ForUsAll we’ve created a 401(k) Benchmarking Center. It’s designed specifically to walk plan sponsors though the benchmarking process.

We’ve distilled the process into four steps. You will quickly be able to see how your plan compares with other 401(k)s.

Step 1: Find out what you are paying.

While recent regulations have helped to improve fee disclosure, it remains difficult to tally up the various expenses. We suggest you start by downloading our Fee Checklist. This one-page organizer can help clear up the murky world of 401(k) plan expenses. This checklist can also help identify hidden fees, kickbacks, and other areas ripe for cost-cutting – steps a good 401(k) financial advisor will help you with.

Need more help? Find your 408(b)(2) form or any other fee disclosure and upload it to our site. We’ll comb through them and alert you of any kickbacks or unnecessary charges.

Step 2: See how key plan metrics compare with industry averages

Our 401(k) Benchmarking Center provides key industry benchmarks so you can see you how your plan compares with the broader market. There you can find the national average for fund fees incurred by plans of various sizes. You can also check out the national average for savings and participation rates. ForUsAll figures also are provided for each metric. Once you have this key information, move on to Step Three.  

Step 3: Evaluate low-cost alternatives

Here’s where the real competition begins. Step 3 in our Benchmarking Center provides three exercises to help you evaluate providers and 401(k) financial advisors competing for your business. These are:

  • The 401(k) shopping checklist. This is the same quick comparison tool mentioned in the new provider search tips section above.
  • Get a ForUsAll quote. Your next step is to get an actual quote from ForUsAll utilizing three different low-cost recordkeepers. See how your current company 401(k) compares. Price your plan here.  
  • The 401(k) RFP Template. This document asks providers to provide critical details on costs, administrative capabilities and advisory experience. Once the competing 401(k) financial advisors return these documents you can make head to head comparisons to find the right partner for your plan.

Step 4: Talk to an expert 401(k) financial advisor

Once equipped with this new information you may find areas in your plan you’d like to improve. We can look deeper into those areas and perhaps identify others. At ForUsAll we are an independent 401(k) financial advisor, which means that we don’t take commissions or kickbacks. We exist to provide Fortune 500-level retirement plan expertise to small and medium-sized organizations. Talk to us today to schedule a free, comprehensive plan health assessment.

401(K) Fiduciary Handbook

Understanding your fiduciary duties and those of your 401(k) financial advisor is critical when it comes starting a new plan or changing financial advisors. We’ve developed a handbook to help you wade through these responsibilities, and understand the difference between various fiduciary roles – like a 3(38) and 3(16) – and how they reduce both your fiduciary liability. You can download the handbook here.

Your 401(k) toolbox

We’ve covered several resources in this blog post. We’ve listed them separately below for quick reference:

At ForUsAll we have developed other educational resources that you can download from our website. These include:

Personalized 401(k) Help

While ForUsAll produces a wealth of educational resources for small business leaders and administrators, our retirement plan experts are happy to help you benchmark and improve your plan. Schedule a free consultation today!

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Alex Goldberg
Alex is a behavioral economics buff and a firm believer in the power of smart default settings. He envisions a future in which Americans don't have to be proactive about saving for a comfortable retirement. As an early member of ForUsAll’s marketing team, Alex leads demand generation efforts, building awareness and enticing plan sponsors with the promise of lower fees, less work, and reduced liability. After graduating from UC Berkeley with a degree in economics, Alex joined an early-stage start up and built their marketing engine from scratch, helping the company grow from twenty or so employees to over a hundred. In his free time, Alex loves to play soccer, listen to podcasts, watch documentaries, try new crockpot recipes, and sample Japanese whiskey. He has no plans of ever retiring, but looks forward to having more time to travel the world.
Alex Goldberg

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