A recent Cogent Reports study from Marketing Strategies International has found that financial advisors appear to be trimming down their pool of “go-to” providers.
While working with fewer providers may have its benefits, according to the study, this trend ultimately puts additional pressure on advisors who have a responsibility to monitor aspects of the relationships between providers and the sponsors they serve to ensure that sponsors are getting the most bang for their buck.
Retirement plan advisors are often looked to for their general ability to evaluate plan providers to ensure all aspects of plan management are working effectively and efficiently. Meaning, among other things, they should advocate for ongoing communication and transparency among all providers to remain cognizant of any changes or issues that could impact the plan at any given time.
When recommending or working with service providers, advisors must be sure to review the following factors regularly to ensure optimal fiduciary compliance.
- Investment Options – Participants must be able to design well-diversified portfolios and appropriate benchmarks must be used to compare the rates of return for specific investment options.
- Plan Features – Regular review is necessary to ensure that plan features continue to meet the needs of participants and that the costs associated with features are reasonable.
- Level of Service – Depending on the level of service needed, you should consider assessing the needs of specific sponsors and whether the service provider is able to meet them.
- Communication – Too much communication? Too little? How much communication is just right? Consider the provider’s communication habits before making a recommendation.
- Website Capabilities – Consider what tools are available online and whether or not they will add value to the provider-sponsor relationship.
- Education – Retirement income planning and investing concepts are essential for plan success. Consider the education tools being offered by the service provider and whether they will help facilitate the plan’s success.
- Plan Administration and Compliance – If you want your plan to be successful, you must have top-notch plan administration propelling it forward. Be sure you are clear on the services that will be provided and their commitment to compliance.
- Recordkeeping – Tracking transactions is a key piece of your plans administrative responsibilities. The level of technology backing up the recordkeeping processes depends on the unique needs of the sponsor. Assess these needs accordingly.
- Fiduciary Support – While it’s not always needed, fiduciary support can be provided through third parties. Depending on the sponsor’s level of fiduciary understanding, Additional support may be a legitimate option.
- Fees – Sponsors must have access to fee disclosures, which can either be shown as dollar amounts or percentages of plan assets or participant balances. Not only should you be able to guarantee that this information is easily accessible, they should be able to verify their legitimacy.
Email Rea & Associates to learn how you can get the tools and support you need to become the trusted advisor to your clients.
By Paul McEwan, CPA, MTax, AIFA (New Philadelphia office)
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