Should I hire a financial advisor before starting a 401(k) plan?

Sponsoring a workplace 401(k) plan can be a little unnerving if you’re not confident in the decisions you’re asked to make. Hiring a financial advisor is one way to alleviate initial concerns or confusion.

Why do I need a financial advisor?

You are not required to hire a financial advisor when implementing a 401(k), but there are a number of advantages in choosing to do so.

In the broadest sense, a financial advisor is a local, trusted point of contact for the plan and “face-to-face” interactions. For plan sponsors, that means having both a sounding board and guide in establishing a retirement plan that is supported in:

  • Plan design and strategies that encourage conversations about participant wealth building, provide hiring/employee retention incentives and actively maintain plan due diligence procedures and documentation.
  • Technical support that provides ongoing plan monitoring and evaluation to keep investment options up to date and plan fees in line, as well as employer guidance on tax advantages the plan offers.
  • Education materials for plan sponsors and participants about finances and using the 401(k) plan to its best advantage. 

With all of the upsides, it’s easy to overlook an important potential downside. Financial advisors cost money, and the expense you incur will ultimately increase plan fees. In order to accurately weigh the value of partnering with a financial advisor against the cost of the benefit, it’s essential to vet an advisor for their retirement plan knowledge and experience.

How do I vet a financial advisor?

When selecting a financial advisor, look for someone who possesses the knowledge base to assist you with the appropriate fiduciary tasks or offers a retirement plan that has a fiduciary service included.

Some key criteria a potential financial advisor partner should possess includes: 

  • A thorough understanding of the laws and compliance regulations surrounding 401(k) plans.
  • A well-defined strategy for supporting the day to day operation of a 401(k) plan.
  • A game plan for participation education and participation.  
  • Assistance with preparation of the plan Investment Policy Statement (IPS). 
  • A willingness to provide decision-making support in considering which decisions are in the plan participants’ best interest and identifying all possible courses of action.
  • A demonstrated ability to select diversified investment offerings for your plan.

In some instances financial advisors select 401(k) plans like CoPilot to provide enhanced services to plan sponsors. However, that doesn’t mean you have to choose a financial advisor in order to access the benefits of the CoPilot plan. CoPilot’s fiduciary protection and participant services are directly available to plan sponsors on its own as well. It is ultimately your decision – guided by the best interests of your plan participants.

Providing a workplace 401(k) plan is a big responsibility. Let’s talk about how you can best proceed with or without a financial advisor, and the options available to you. Call us at 800-236-7400 or contact us online today.