When interviewing potential retirement plan consultants, it’s helpful to know the right questions to ask.
Retirement plans are complex, and depending on your experience, potentially confusing. They’re also important from a recruiting and retention standpoint, and instrumental in helping employees accumulate assets for retirement.
I’ve been a financial advisor focused on retirement plans for 20+ years, and I’m honored to be named to Investopedia’s list of the top 100 financial advisors many years running. It’s my goal to help you better understand the ins and outs of this important part of financial services.
I’m also going to work hard to avoid jargon and to keep this as simple as possible. Finally, I’m going to assume you’re responsible for some aspect of your organization’s retirement plan.
Here’s what we’ll cover:
- Philosophy and responsibilities
- Scope of services
- Fiduciary support
- Financial wellness
- Products and professionals
- Ongoing relationship
- How do you make money
- Customary scope of services
Let’s get started.
While a lack of experience shouldn’t automatically role someone out, retirement plans are complicated and you’ll benefit from working with someone who knows what they’re doing.
Keep in mind there are a lot of parties required to run a successful retirement plan. Someone who has existing relationships and knowledge of what’s required can make your life easier.
- How long have you been working in the financial industry?
- How long have you been working with retirement plans?
- What percentage of your clients are retirement plans?
- What are the other aspects of your business outside of retirement plans?
Philosophy and responsibilities
It’s logical to assume what someone’s philosophy is on consulting retirement plans, but you know what they say about assumptions. Here’s the thing; there are a lot of different kinds of financial professionals doing lots of different kinds of financial things.
You want to know if they believe themselves to be responsible for protecting the plan sponsor (you), educating the participants (your employees), or both.
You also want to know what they’ll be accepting responsibility for, and what they won’t.
- Tell me your philosophy on retirement plan consulting
- What aspects of the retirement plan will you be responsible for, and what will you not be?
Scope of services
In the final section of this post, I’ve included a customary list of services retirement plan consultants provide. There’s a ton of industry jargon, but I thought it would be valuable for you to have.
Similar to what their responsibilities are, you want to know what they’re going to do for you, and what they’re not. Will you have an ongoing relationship with this person, or will they perform a specific task such as an RFP (request for proposal).
The main areas are:
- Plan design
- Provider selection
- Selecting and managing the investments
- Plan administration
- Employee education and support
- What role will you plan in plan design?
- What role will you play in provider selection?
- What role will you plan in selecting and managing the investments?
- What role will you plan in plan administration?
- What role will you plan in employee education and support?
If they’re not going to provide support in any of those areas, ask how they suggest you handle it.
There’s a lot of buzz and talk around the word fiduciary. While some of it’s been overblown, it’s important for you to understand how it works, and whether or not they will provide support.
Simply put, being a fiduciary makes you legally obligated to act in the client’s best interest, and it makes you the fiduciary a legally responsible party. Fiduciary services cost money, so the more of them you add, the more expensive your retirement plan will be.
The main types of fiduciary support for a retirement plan are:
- 3(16). Think of this as who is responsible for the operations of the retirement plan. A fiduciary in this area ensures the money is in the right places, notices are sent out, and all administrative boxes are checked.
- 3(21). This is related to the plan investments, and means the financial professional shares the fiduciary responsibility with the plan sponsor (you).
- 3(38). This is also related to the plan investments, and means the financial professional assumes full fiduciary duty. When this happens, the plan sponsor no longer has a say in investment selection or management.
- Do you perform fiduciary services for retirement plans?
- If yes, how much do you charge for those services?
- If not, do you work with other professionals who could serve as fiduciaries for your plan?
Financial wellness is all about helping your employees better understand and participate in the retirement plan. There is a legal obligation for you to provide some type of education about the plan, but that obligation is easily satisfied.
Many companies have recognized their employees are struggling with financial literacy, and are devoting more resources to financial wellness.
- What are your philosophies and practices around financial wellness?
- How do you approach participant education and support?
- If they don’t provide wellness resources, ask if they work with other professionals who can provide them to your employees.
Products and professionals
The last thing many plan sponsors want is to turn a commission-driven salesperson loose on their employees. That being said, when one of your employees has a need for an additional financial product or service, I like to be able to connect them with a high-quality resource.
- Do you sell financial products and services?
- How do you handle when an employee asks about financial products or services?
You’ll want to know what to expect from an ongoing relationship with your retirement plan consultant (if there will be one). You may be looking for someone to handle one aspect of your plan like conducting an RFP, or you may be looking for someone to manage your plan indefinitely.
- What will our relationship look like moving forward?
- How often will I hear from you?
- What happens when I have a question?
- What happens when an employee has a question?
How do you make money
It’s really important to work with someone who is transparent about how they make money. While the industry has gotten a lot better, there are still a lot of bad actors charging way too much and not being upfront about it.
If the person you’re talking to isn’t comfortable answering your questions about compensation, you’re not talking with the right person.
It’s perfectly wonderful for people to be compensated for the work they do. And it’s perfectly wonderful for you to know exactly how much everyone is being paid.
- How much is the retirement plan provider charging?
- How much do the investments cost?
- How much do you charge?
- What will your ongoing charges be?
- Who pays these fees (the plan sponsor or the retirement plan)?
Customary scope of services
Up to this point, I’ve spared you from too much jargon. The following four areas can be a guide as you interview potential retirement plan consultants. You should get clarity on whether or not they will handle the bullet points.
- Assist plan sponsor in reviewing objectives and options available through the plan
- Review plan committee structure and administrative policies/procedures
- Recommend participant education and communication policies under ERISA 404(c)
- Assist with development/maintenance of fiduciary audit file and document retention policies
- Deliver fiduciary training and/or education periodically or upon reasonable request
- Assist with coordinating participant disclosures under ERISA 404(a)
- Recommend procedures for responding to participant requests
Service Provider Support
- Assist fiduciaries with a process to select, monitor and replace service providers
- Assist fiduciaries with review of Covered Service Providers (“CSP”) and fee benchmarking
- Provide reports and/or information designed to assist fiduciaries with monitoring CSPs
- Assist with use of ERISA Spending Accounts or Plan Expense Recapture Accounts to pay CSPs
- Assist with preparation and review of Requests for Proposals and/or Information
- Coordinate and assist with CSP replacement and conversion
Investment Monitoring Support
- Periodic review of investment policy in the context of plan objectives
- Assist the plan committee with monitoring investment performance
- Provide analysis of investment managers and model portfolios
- Assist with monitoring Designated Investment Managers and/or third-party advice providers
- Educate plan committee members, as needed, regarding replacement of DIA(s) and/or QDIA(s)
- Facilitate group enrollment meetings and coordinate investment education.
- Assist plan participants with financial wellness education, retirement planning and/or gap analysis.
When you’ve completed your interviews, you can ask the candidates for the scope of services they’ll be providing.
I commend you for researching this important topic, and I’m hopeful I provided you some value.
If you’d like to connect with us regarding our work as retirement plan consultants, we’d be thrilled to chat. You can connect with us here.
If you’re looking for a financial wellness resource, check out Money Alignment Academy.
Good luck in your process!
Stay up to date by getting our monthly updates.
Check out the LifeBlood podcast.
LifeBlood is supported by our audience. If you purchase through links on our site, we may earn an affiliate commission. Learn more.