The Big 3: Plan Sponsor Questions for the Retirement Plan Advisor

Posted by Dan Collins

May 16, 2017 at 10:00 AM

questions for the retirement plan advisor

When you’re looking to hire a qualified expert, you likely do your homework first. Whether you need a carpenter to build a new garage, a surgeon to perform a complex procedure, or a photographer to take a family portrait, you want to know as much about those providers as possible in order to find the right fit.

When seeking the help of a retirement plan advisor, potential plan sponsor clients are no different—and for good reason. They bear the responsibility of fiduciary liability and of being a steward for their employees’ retirement assets. As such, when plan sponsors are seeking the help of an advisor to manage those obligations, asking the right questions will be a key part of their decision-making process.

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So what are some common plan sponsor questions for the retirement plan advisor? Here, we’ll investigate the “big three,” plus provide some compelling, differentiating answers.

What Plan Sponsors Want to Know

In How to Choose a Financial Advisor, the CFP Board of Standards offers guidance to people looking for a financial professional, including 10 key questions that are relevant to the qualified plan arena. In particular, there are three plan sponsor questions for the retirement plan advisor that you should be prepared to answer.

1) What are your qualifications and experience?

Any potential plan sponsor client worth your time will want to know if you're qualified to do the job—and how your experience working with other clients will benefit them. Along with holding the appropriate registrations, advisors who are committed to the retirement plan marketplace usually have at least one of these specialized retirement designations.

Accredited Investment Fiduciary® (AIF®). This designation is among the most recognized in the industry and focuses on building a sound fiduciary process.

Certified Plan Fiduciary Advisor (CPFA). This is a relatively new credential offered through the National Association of Plan Advisors. By earning the CPFA, you can "demonstrate the expertise required to act as a plan fiduciary or help plan fiduciaries manage their roles and responsibilities."

Chartered Retirement Plans SpecialistSM (CRPS®). The CRPS demonstrates to clients that you know how to create, implement, monitor, and document a process to manage and mitigate their fiduciary risk.

Certified 401(k) Professional (C(k)P®). This designation is administered by the Retirement Advisor University in collaboration with the UCLA Anderson School of Management Executive Education. It recognizes any substantial practical retirement plan management experience and requires completion of a comprehensive and highly specialized educational program.

Professional Plan ConsultantTM (PPC®). By earning this designation, you will be equipped with the know-how to help plan sponsors meet plan administration challenges, as well as help plan participants and beneficiaries meet their retirement goals.

In addition to your qualifications, plan sponsors may also question you about your relative experience. You can expect to hear inquiries like: 

  • How have you impacted the retirement plans of similar businesses?
  • How have you streamlined the plan governance process?
  • How have you helped employees increase their deferrals or improved participation rates?
  • How has your knowledge of the marketplace allowed clients to reduce their fees?
  • How have you helped your clients to spend more time running their business and less time worrying about their 401(k) plan?

Articulating how you have made a meaningful difference for your current clients will help potential clients envision how you can help them in the same ways. And remember, if you are just starting to break into the 401(k) space and have fewer tangible examples, draw parallels with your core business and explain how your experience in those areas can correlate to success on the qualified plan side.

2) What services do you provide? 

According to the 2016 Fidelity Plan Sponsor Attitudes Survey, here are the top three reasons plan sponsors begin using an advisor: 1) They are concerned about fiduciary duties, 2) they need help with plan investments, and 3) they need a better understanding of how well the plan is working for participants. The services you provide should address all three of these concerns and will likely fall into one of the following categories.

Full service. As a full-service advisor, you are the go-to person for everything related to the plan, including: 

  • Investments (e.g., selection, screening, monitoring, and investment policy statement maintenance)
  • Participant education and/or advice; financial wellness coaching
  • Service provider management (e.g., vendors should keep you informed of all communications)
  • Plan design consultation
  • Fee and service benchmarking
  • Nondiscrimination testing and annual tax filing
  • Investment committee management
  • Plan governance and fiduciary management support

You may not provide all of these services, but you can ensure that deliverables from all parties are reviewed and executed—helping minimize the burden for the employer while maximizing participant results. 

Investment services only. Here, your focus is on investment committee management, investment policy statement generation and review, fund monitoring, and fund replacements. You may also conduct vendor searches or facilitate an analysis of a target-date fund suite or stable value manager.

Participant services only. These services can focus on a number of areas: 

  • Participant education, including general 401(k) meetings and seminars on the benefits of saving for retirement, tax advantages, and plan features
  • Participant advice (one-on-one meetings)
  • Financial wellness programs (i.e., financial education programs that go beyond the 401(k) plan, such as college saving, debt management, health care, and buying a home)

Project-based services. These are generally one-off projects you might do for a plan sponsor: 

  • Plan health assessments
  • Service provider searches (e.g., recordkeeper/TPA due diligence, request for proposals)
  • Plan fee analysis
  • Target-date fund review
  • Qualified default investment alternative reviews
  • Fiduciary audit file creation or review

Regardless of which category you belong to, your ability to clearly articulate (verbally and through a service agreement) which type of advisor you are, and to create a repeatable and scalable process for all clients, will go a long way toward helping you find success in this space. Above all, be sure to document your process. Remember, ERISA is ultimately a process and procedure law, as opposed to one based on outcomes.

3) What's your fee? 

There’s no getting around it: plan sponsors (who are business owners or stakeholders at their core) are acutely interested in the bottom line. But that’s actually good news for retirement plan advisors. Why? Because business owners recognize that value and cost go hand in hand. So, it’s up to you to give a clear, transparent depiction of your value to their business and their employees, based on the services that you have recommended or agreed to provide in exchange for your consulting fee. 

Retirement plan consulting fee structures are usually presented as follows: 

  • Rate: Flat dollar amount, hourly amount, or amount based on a percentage of assets
  • Frequency: One time or ongoing
  • Method of payment: Taken from plan assets or billed directly to the plan sponsor

Here, you might start with industry fee averages, but don’t rely on these alone to determine your fee. For example, if a client has multiple locations and you’ll need to travel periodically to meet employees, be sure to factor that extra time commitment into your fee. One strategy is to develop a fee structure that allows you to charge a standard fee to clients who require a straightforward suite of services but charge a premium for services that require more time, attention, and allocation of resources.

Set Yourself Apart

Of course, there are many other questions that potential clients may ask. But the three outlined here are especially pertinent to the retirement plan space. Your ability to address these questions, and to articulate your answers and your value proposition, is what will help set you apart from the many other retirement plan consultants. So, the next time a request for proposal or request for information comes across your desk, use it as an opportunity to illustrate all the resources and knowledge you have at your disposal.

What other questions have plan sponsors asked you? Which designations are most important to potential clients? Please share your thoughts with us below.

Editor's Note: This post was originally published in April 2015, but we've updated it to bring you more relevant and timely information.

1:1 Retirement Plan Business Consulting

Topics: Retirement Consulting

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