How to Hire a 401k Advisor?

By Joe DeNoyior

How to hire a 401k advisor is an exceedingly common question with an incredibly simple answer. We find that hiring a 401k advisor boils down to one thing, and that’s alignment with your organization and your objectives. To help determine that alignment, we find it’s helpful to ask two questions:

  1. What is the primary goal of your retirement plan?
  2. What is the committee aiming to accomplish?


What is Your Retirement Plan’s Goal?

It may seem obvious at first take, right? “Our retirement plan’s goal is to enable our people to retire.” However, that answer comes in several flavors, and more questions are needed to flush out the many facets required to assemble an appropriate retirement plan:

  • Do you want high risks and maximum potential returns? Or do you prefer a more conservative minimal potential return for retirement?
  • Do you want to focus only on income and risks, or do you want to consider the causes your investments are supporting?
  • Is the same plan appropriate for all employees, or do you want to offer multiple options to enable them to choose their own path?

There are several other supporting questions, but ultimately it comes down to understanding what the retirement plan should do if it is successful.

Once that question is answered, we then want to consider…

What is the Committee Aiming to Accomplish?

To best determine what we’re aiming to accomplish through this process, beyond just the objectives, we need to ask a few more questions. Namely, what’s the core reason you’re considering a new 401k advisor?

  • Is it your first time hiring one?
  • Are you replacing an existing advisor?
    • If so, why?
    • Better service?
    • Better outcomes?
    • Lower rates/fees?

With all these questions answered, we’re well positioned to understand what we need from a 401k advisor. And now it’s a matter of how to select one.

How to Pick a 401k Advisor?

There are two usual processes organizations will follow to select a 401k advisor:

  • Interview
  • RFP

The interview process is usually less formal, quicker moving, and enables you to not only determine how organizations respond to questions, but how they communicate, get a sense of their culture, and more.

The RFP process is often more formal, a little slower moving, and is usually meant to get more of an apples-to-apples comparison on specific key deliverables.

There isn’t a “right” or “wrong” way to go about picking an advisor, however, in either of these cases you’ll want to ensure the questions we’ve discussed above serve as the foundation of the relationship. Don’t get caught on the have-to-dos.

For example, we “have to” go through our fiduciary checklist. We “have to” make sure our advisor is also a fiduciary, etc. Those are basics, table stakes.

The core questions around alignment will help you determine if the advisory firm meets the culture of your organization.

Can they add real value? Will they help engage employees? Will they help educate your employees?

At the end of the day it can be a very emotional decision hiring an advisor for your 401k plan, particularly if you’ve had a long-term relationship with an existing advisor. This process does not have to be painful if you boil it down to these key questions which help ensure you’ll find a firm fully aligned with yours.

Please contact us if you’d like more information. If we’re not the right fit, we can help you better find the team that is.

 

 


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended as authoritative guidance or tax or legal advice.

Securities offered through LPL Financial, Member FINRA/SIPC.  Investment advice offered through Global Retirement Partners, LLC (GRP) a registered investment advisor.  GRP, LPL Financial, and Washington Financial Group are separate non-affiliated entities.

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