Go beyond a basic 401(k)

Go beyond a basic 401(k)

Give your employees more than just a 401(k), join the movement.

5 min read

4 Reasons to Hire an Advisor for Your 401(k) Plan

Healy Jones
May 17, 2017
4 Reasons to Hire an Advisor for Your 401(k) Plan
Table of contents

If your small business’s 401(k) is already up and running, you deserve a hearty congratulations. You may have put the plan in place all by yourself and are running the plan solo, without an advisor.

According to the Retirement Advisor Council, many small businesses are managing their own 401(k) plans. But of those small businesses that have hired advisors to help out, as many as three-quarters of them don’t operate with an advisor who specializes in retirement plans. (In fact, InvestmentNews describes 90% of retirement plan advisors as “blind squirrel” advisors, who aren’t really all that qualified to work on a corporation’s retirement plan.

Say you get a little stressed when the due date approaches for the Form 5500 but, all in all, you think you can continue to manage the company 401(k). And you may be able to do just that. But we think there are least four reasons you may want to consider getting some help.

Reasons to hire a 401(k) advisor:

1. Improve employee outcomes by getting employees enrolled and contributing.

As you may have already learned, just because you have a 401(k) doesn’t mean that all of your employees are taking advantage of it. Often just getting enrolled in the company plan is a hassle for employees. And if they do manage to navigate the enrollment process, they must then determine their own asset allocation, and then select individual investments from among those offered in the plan.

A good advisor can make enrollment easy while engaging employees so they understand not only how their plan works, but also how much money they need to sock away each paycheck to increase the odds of a successful retirement. At ForUsAll, we can automatically enroll employees once they become eligible, establish automatic saving rates escalations, and even provide employee education through “DAVE,” our award-winning virtual advisor. Employees can interact with DAVE by any mobile device at their convenience, and when they need help from a human, our investment advisor representatives are a phone call away.

Finally, as a business owner, you may really know how to manage and grow your business – but you may not be all that qualified to assist employees in their investment and financial questions. At ForUsAll, we have a dedicated Client Success team, who fields questions from our clients’ employees – everything from investment allocation to other financial wellness topics. Adding a qualified advisor, who is willing to act as an investment fiduciary to both your business and your team, can help improve employee outcomes.

2. Reduce your liability

Small businesses often don’t have the luxury of hiring a full-time HR manager and setting up an investment committee to manage the 401(k). But if something goes wrong, the Department of Labor (and possibly the courts) will be looking for the plan’s fiduciaries. And if you haven’t explicitly outsourced your investment and administrative fiduciary liabilities then YOU are likely the fiduciary. And “named fiduciaries” in particular take on explicit personal liability for the correct management of the retirement plan.

For example, evaluating investment options for your plan is a big job. You may even be ready to hire an investment advisor to take on that role and relieve you of the liability associated with selecting your plan’s investments. But even if you hire an investment advisor to consult with you on your plan’s mutual fund offerings, that advisor may be acting as a 3(21) fiduciary. If so, you are still the plan’s investment fiduciary, and you are still liable for investment decisions. If you want to delegate the work and accountability for selecting the plan’s investments, make sure to hire a 3(38) fiduciary.

At ForUsAll, our plans come with a 3(21), 3(38) and 3(16) fiduciary. The 3(16) fiduciary takes on the work and the liability for administering your company’s plan. We relieve you of this liability because we believe technology and compliance expertise can all but eliminate the administrative risk associated with offering a 401(k). Our administration platform meets the highest ERISA 3(16) fiduciary standard, and addresses common compliance issues with payroll integration, customer-centered design and a platform designed to meet the latest compliance standards.

3. Lower your workload by hiring a 401(k) advisor.

As a small business owner you want to grow your business—not your list of administrative duties. But a 401(k) has a lot of moving parts. These can include fielding questions from employees, enrolling employees, meeting employee education requirements, and processing loans and hardship withdrawals. Then there is nondiscrimination testing, and determining what actions, if any, should be taken to improve participation and salary deferrals. Managing a 401(k) can seem like an endless to-do list, particularly when it is not your real job. And then time must be found to monitor the plan’s investments and make sure investment and overall plan fees are reasonable. One of the biggest “to-dos” on the to-do list is filing the IRS Form 5500. There are significant penalties for inaccuracies on the form, and what are the odds this will become less complicated? If wearing all of these hats is getting in the way of running your business, you may want to consider delegating these tasks by adding a 401(k) advisor.

4. Handle investment options

Unless you have hired a 3(38) or 3(16) advisor, one of the biggest hats you are wearing is that of investment manager. ERISA requires fiduciaries to prudently select and monitor 401(k) plan investments. With all of your other duties, are you able to continually monitor the funds to make sure that they remain appropriate? Do you have a set of criteria for putting funds onto a watch list, and are you regularly reviewing your funds’ performance? Are the fund expenses reasonable, or are lower costs, similar funds available on your current provider – and do you have a rationale for not choosing those lower cost options?

Go beyond a basic 401(k)
Give your employees more than just a 401(k), join the movement.
Healy Jones
About Author -
Healy Jones
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This material has been prepared for informational and educational purposes only and should not be construed as a recommendation by ForUsAll, Inc., its affiliates or employees (collectively, “ForUsAll”)  to activate a cryptocurrency window or invest in crypto.  Investing in crypto can be risky and investors must be able to afford to lose their entire investment.  You should consult with your own advisers before activating a cryptocurrency window or investing in crypto.  ForUsAll does not provide legal, tax, or accounting advice. Please refer to your Plan's fee disclosure for more details.© 2023 ForUsAll, Inc. All rights reserved.
1 Schwab 2022 401(k) Participant Study - Gen Z/Millenial Focus, October 2022.
2 As of 12/31/2022. Employees include both current employees and terminated participants with a balance.
3 "Morgan Stanley At Work: The Value of a Financial Advisor" Morgan Stanley, March 2022.
4 Sarah Britton was a client when she provided this testimonial through an independent third party review website. She received no compensation for her remarks. There are no known conflicts of interest in the provision of her comments related to the services provided.