Why Hire a Retirement Plan Consultant?

66% of retirement plans work with a retirement plan consultant or advisor, according to 2017 PLANSPONSOR Defined Contribution survey. This number has steadily grown the past few years.

The top 3 reasons[1] plan sponsors say they hired an advisor are:

#1 Want to better understand how well my plan is working for my employees and how I can improve it.

#2 Our company has grown, and the retirement plan has become a more complicated process.

#3 We have less time to devote to the retirement plan now, so we need someone to help us.

How are retirement plan consultants addressing the plan sponsor concerns above?

Below are the top services performed by a retirement plan consultant, according to the Retirement Advisor Council:

  • Plan governance – Help establish a retirement plan committee and keep it on track
  • Investment due diligence – Better investment process, more diversification
  • Vendor benchmarking – Determine if the fees charged to the plan are reasonable
  • Participant Outcomes – Make plan design and education recommendations to drive improved replacement ratios, participation and savings rates.
As you evaluate your retirement plan advisor or consultant relationship, it’s important to understand the following:
  • What percent of the advisor’s total revenues are derived from retirement plan consulting?
  • What scope of services does the advisor provide?
  • How is the advisor compensated?

The retirement plan committee or a group of key decision makers should interview and evaluate retirement plan advisors. Utilize industry disclosures, including FINRA’s BrokerCheck and the SEC’s Investment Adviser Public Disclosure, to determine if there are any regulatory actions, complaints, arbitrations, etc. In-person meetings with potential consultants is advisable regardless of plan size and we see RFPs for consultant services for plans as small as $5 million. A prudent process for selecting a retirement plan consultant will result in a best-fit for the plan, decision makers and participants.

[1] Fidelity 2018 Plan Sponsor Attitudes survey

The above description provides a brief overview of the term and phrases used within the insurance industry. These definitions are not applicable in all states or for all insurance and financial products. This is not an insurance contract. Other terms, conditions and exclusions apply. Please read your official policy or full details about coverage. These definitions do not alter or modify the terms of any insurance contract. If there is any conflict between these definitions and the provisions of the applicable insurance policy, the terms of the policy control.