PSNC 2019: Criteria to Consider When Selecting a Retirement Plan Adviser

Jim Hill, manager of support services at Intermountain Power Service Corp. in Delta, Utah, explained to attendees of the 2019 PLANSPONSOR National Conference (PSNC) that his company has a defined contribution (DC) plan, an active defined benefit (DB) plan and a retiree medical plan. Therefore, when the firm was searching for a plan adviser, 10 years ago, it wanted to find someone who could handle investments, fee monitoring and compliance issues for all three.

He said the company needed a plan adviser who would be an Employee Retirement Income Security Act (ERISA) fiduciary and also provide fiduciary training to plan committee members. “We looked at advisers’ education and experience as well as certificates and training,” he said. “We also considered experience the advisers had in bad markets, and how they could help us, as well as how many clients, particularly ERISA [Employee Retirement Income Security Act] clients, the advisers served.”

Hill said Intermountain was seeking an adviser willing to attend all committee meetings, someone who fit the culture of the firm—it’s located in a rural area and has many blue-collar employees—and someone to give it the attention it needed. “I needed someone to take some of the burden off me,” he recalls. “I don’t have the expertise required for some decisions.”

Hill added that his firm was initially just looking for an investment adviser but then decided participants need advice, so it was important that the adviser or adviser team would come and meet with employees. He noted that adviser teams should have people who specialize in various areas, such as one in compliance and another in education.

Stace Hilbrandt, managing director and founder of 401k Advisors LLC in Chicago, recommended starting with the adviser’s experience. Does he have a background in recordkeeping, or has he worked as an ERISA attorney? How long has he worked with retirement plan sponsors? “What doesn’t work is someone with an unrelated background who just decided one day he wanted to be an adviser,” Hilbrandt told attendees.

Industry involvement is important, too. Does the adviser go to conferences? Is he a member of industry organizations? “The adviser needs to prove he will always bring industry best practices to the plan sponsor,” Hilbrandt said. He also pointed to the value of credentials. He’s not a fan of a long string of credentials, he said, but having a few shows that the adviser took the time to get certified by reputable organizations.

According to Hill, trust is another crucial factor when selecting a retirement plan adviser. “As you go through the selection process with them, they all have similar stories to tell, but who can you trust? Who takes an interest in your business or industry and your specific challenges?” he said. He added that his firm really appreciates its adviser’s hands-on approach.

“They participate in committee meetings and work with the same faces for many years, so they know a lot of the history, culture and goals of our firm,” he said. He noted that his adviser stores committee meeting minutes and takes some of the administrative burden away. The adviser is also proactive and will call Hill to tell him about a new trend or new regulation or law to keep in mind.

Hilbrandt told attendees they should look for advisers with moral character. “You need to know that, when the adviser is talking to participants, he is fully focused on their best outcomes, not what he can sell them,” he said. “An adviser should be great at relationship building—with the committee, retirement plan staff, participants—they won’t open up until they have a relationship.”

Brandon Radach, managing director Midwest DCIO at John Hancock Investment Management in Chicago, said a good way to determine whether advisers have experience is to ask how long they’ve been in the business, and what kind of plans, plan sizes and industries they’ve been working with. He said, while plan sponsors should check references, they should take what those say with a grain of salt because most references will say good things. “But there’s value in having a conversation with references, asking specific questions about the service model,” he said.

Concerning service models, Hilbrandt said, there is a spectrum, from a one-adviser office to adviser teams of 20 members. “What’s important is what gets delivered to the client, but plan sponsors should ask themselves whether they are comfortable with the longevity of people in the firm,” he said. “Some plan sponsors are uncomfortable with not knowing who will show up at meetings or not knowing whom they should call. However, some consider teams as an extension of their own staff.”

Radach said plan sponsors should also ask advisers for case studies of how they advised a plan facing a challenge—what they implemented and how the plan improved. And the case studies should relate to the sponsor’s own plan size, challenge or other characteristic.

He noted that Retirement Playbook Inc. is a firm that helps benchmark advisers and found four things clients want most.

• Leadership – They didn’t want “yes” people—advisers should say, “Have you considered this?”
• Intelligence – Where did the adviser go to school? What did he study? What does he read in his spare time? Plan sponsors should find out in conversation how advisers became experts in the space.
• Independence – If an adviser works with a wirehouse, plan sponsors should find out if that inhibits the service he provides.
• Clout – Clout is exhibited in what investment and recordkeeping firms advisers work with, Radach said. “Providers don’t want to work with someone who isn’t good. To see if an adviser is well-known, ask if he attends due diligence meetings offered by providers. Providers don’t invite people who are not relevant,” Radach said.

Dan Peluse, director of retirement benefits at Wintrust Retirement Benefit Advisors in Chicago, and moderator of the panel, additionally suggested plan sponsors ask their recordkeeper or investment provider for adviser recommendations.

Advisers to small plans

Asked what small plans—which may be unable to afford a popular adviser—should look for, Hilbrandt said advisers can normally get to a fee level that justifies the services they provide. Small-plan sponsors should make sure advisers are honest about what services they will deliver.

Peluse agreed that advisers to larger plans can scale back on fees and services to fit smaller plans. “There needs to be a conversation between the plan sponsor and adviser about what service model fits the plan,” he said.

Radach noted that there are advisers or advisory firms that work in different niches. “Just because an adviser works with small plans doesn’t mean the plan sponsor is sacrificing knowledge, clout or service,” he said.

“You get what you pay for,” Hill reminded attendees. He said it may be beneficial for small plans to pay more. “We paid more, and our accounts have grown and compliance has improved,” he said.

Evolving market

The industry is changing in various ways, and Peluse advised sponsors to focus on firms that continue to evolve and grow.

One area expected to evolve, Radach said, is data mining—probably on the adviser- as well as the recordkeeper-side. This will help plan sponsors obtain more specific data about participants. He said the industry will likely see more specialists on adviser teams, too—experts on health savings accounts (HSAs) for example.

According to Hilbrandt, the adviser space is morphing from a high level of working only with a plan sponsor’s benefits team and C-suite to more of a hands-on, personalized business model focusing specifically on clients’ retirement plans and the outcomes for participants.