4 Reasons to Add an Advisor to Your 401(k) Plan

May 17, 2017 by Healy Jones
adding advisor to 401k

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?

At ForUsAll we believe if you hire an investment advisor for your 401(k) plan, that investment advisor should take the liability and fiduciary responsibility for the investment advice pertaining to the plan – not the employer, and not the employees. While it’s nice to be given advice about which investments to include in the 401(k), if you are still making the final call on the plan’s investments (and retaining that liability) is that a relationship that’s worth the time and expense?

Not only can ForUsAll serve as a conflict free independent advisor, we can keep employees engaged with the 401(k), and even answer their financial questions that may have little or nothing to do with the company plan.

A good advisor can make sure your 401k serves its purpose: to provide long-term investment growth with tax-free compounding.

That’s a hat we wear proudly.

Reduce your costs

It is entirely likely that you could add an advisor to your 401(k) plan AND lower your costs. Experienced advisors bring negotiating power to the relationship that you have with your recordkeeper, and can help you find a lower cost fund lineup.

Ready to talk with a retirement consultant who is excited to offer advice and investment options that are only in your best interest? Schedule a time to talk with ForUsAll today.

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Healy Jones
Healy joined ForUsAll because he believes that all Americans deserve a fulfilling retirement. As the head of marketing, he’s focused on spreading the word that small businesses can offer their employees a great 401k plan. Prior to ForUsAll, he ran the acquisition marketing team at Sunrun, the nation’s largest dedicated residential solar provider, where he lead the direct to consumer team to hundreds of percent year over year growth. He began his career in financial services, working for JP Morgan, Summit Partners, and Atlas Venture. Healy has an A.B. from Dartmouth College and an M.B.A. from Wharton. When he’s not working, Healy and his wife enjoy taking their daughter rock climbing and filling their wine fridge. When he finally retires, he hopes to start emptying the wine fridge.
Healy Jones

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