Benefits and Disadvantages of Hiring a Retirement Plan Advisor

Planning for your own retirement can be confusing and intimidating, but managing a corporate retirement plan for your employees can be downright daunting.

Retirement plan concept

That’s why many organizations hire a retirement plan advisor.

Understanding what a retirement plan advisor does, and how they can help your company create a strong retirement plan is essential. Armed with a greater understanding of the services offered by these advisors, you can make a decision that benefits both your company and its employees.

What is a Retirement Plan Advisor?

Financial advisors help individuals or companies plan for major life events and manage their investments. Retirement plan advisors are a specific type of financial advisor that work with employers to develop retirement planning solutions; these solutions are designed on a case-by-case basis to best serve employees and meet the company’s obligations as plan sponsors.

When you offer employees a company-sponsored retirement plan, your company has certain obligations. As Paula Friedman of McLean Asset Management explains in Forbes, “Employers that sponsor a retirement plan (referred to as a plan sponsor) and people with decision-making authority for the plan are most likely considered a fiduciary. As such, they are obligated to operate the plan in the best interests of the participants.” If the company doesn’t fulfill these responsibilities, they can face steep penalties and liabilities.

With employees’ financial futures and the company’s well-being at stake, it makes sense that 75 percent of plans employ a retirement plan advisor.

Key Services and Responsibilities

The most obvious benefit of hiring a retirement plan advisor is that you will have an experienced professional managing your plan. According to Courtenay Shipley, Chief Planologist at Retirement Planology, Inc., retirement plan advisors are usually responsible for managing the design of the plan and the methods for choosing investments, monitoring and reporting the performance of investments, helping companies meet their fiduciary responsibilities and deadlines, and tracking the plan’s vendors and affiliated expenses.

Seeking professional advice

Retirement plan advisors can also inform employees about plan guidelines and limitations, and help them select between the various retirement planning solutions available. Shipley explains that advisors may help create employee communications or even organize group meetings or one-on-one discussions with participants.

Find the Right Advisor

Not all advisors are created equal. There are actually several different types of retirement plan advisors, the primary difference being the level of liability they accept for the plans they manage.

This graphic in Paula Friedman’s Forbes article does a great job of summarizing the difference between a Registered Representative, a 3(21) Limited Scope Advisor, and a 3(38) Designated Investment Manager.

Essentially, the first bears no fiduciary responsibility, the second shares responsibility with the company, and the third accepts the ultimate liability for plan decisions. It’s also important to assess your retirement advisor’s methodology; do they abide by the Modern Portfolio Theory? Do they specialize in Exchange-Traded Funds? Getting the details beforehand can ensure you select the right individual to manage your funds.

As with almost any consultant or vendor, one of the biggest concerns you may have about hiring a retirement plan advisor is cost. Fortunately, as Forbes contributor Wade Pfau explains, “Many retirement plan advisors now use service tiers and custom pricing to align their fees directly with the services provided.” This means you can choose and pay for whichever services you need. But Pfau also advises companies to compare prices and keep in mind the value provided to the plan.

Close-up of retirement saving concept

Reaping Rewards From Your Retirement Plan

Creating and maintaining a robust retirement plan for your employees can be a complicated endeavor, but it can also pay huge dividends when it comes to the quality of your workforce.

Along with salary and healthcare, your retirement plan is one of the most important tools in retaining talent. With increased uncertainty about the future of Social Security, retirement plans are an even more vital bargaining chip for older employees.

Although companies should take care and do their research, a retirement plan advisor brings expertise and insight to a complicated aspect of business management. Selecting a high-quality advisor can help ensure a better future, not only for your employees, but for your company as a whole.

Add Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.