5 Key Questions to Ask Before Choosing a Retirement Plan Consultant

At the NAPA 401(k) Summit last month, I had the opportunity to sit on a panel discussing the evolution of Qualified Default Investment Alternatives (QDIAs) in retirement plans. If the topic sounds dry, you’re right.

This conference called together more than 1,000 retirement plan advisors and another 1,000 401(k) professionals to connect, learn, engage, and share ideas. I felt a bit like I was wandering around in a Dr. Seuss book.

In the land of retirement plans, there are many types of advisors, oh yes!
Some are big, and some are small; some are short, and some are tall.
There are fee-based advisors and commission-based ones,
And some who are a mix of both, oh what fun!
There are fiduciary advisors who put clients first,
And those who prioritize their own financial thirst.
No matter the type, it's important to choose with care,
And find an advisor who will give you their best to share.

Easy for Dr. Seuss to say, but frequently difficult for plan sponsors to identify critical differences that will impact the success of your consultant and as a result, your plan participants.

Here are five key questions to ask before choosing a retirement plan consultant:

What is your experience and expertise?

The first question to ask is about the consultant's experience and expertise. You want to work with a firm that deeply understands retirement plan regulations, investment options, and fiduciary responsibilities. Look for a consultant with a track record of success and a proven ability to help plan sponsors achieve their goals.

What is your approach to managing retirement plans?

The second question is about the consultant's approach to managing retirement plans. You want to work with someone who takes a proactive approach to managing your plan, helps you establish goals, and sets a path toward accomplishing those goals. Look for a consultant willing to work not just with the Committee but with the benefits team to develop a plan that aligns with your organization's goals.

How do you ensure compliance with regulations?

The third question to ask is about the consultant's approach to compliance with regulations. Retirement plan regulations are complex and constantly evolving, so it's essential to work with a consultant who stays current with the latest changes. Look for a consultant who has a thorough understanding of the regulatory landscape and can help you comply with all applicable laws.

What is your investment philosophy?

The fourth question to ask is about the consultant's investment philosophy. Every consulting organization should have a philosophy, and finding a consulting firm whose approach matches your own will generate the best outcomes. There is no one correct way to develop an investment menu for a defined contribution plan, but there should be a shared set of goals and philosophies to drive decisions.

What is your fee structure?

The final question to ask is about the consultant's fee structure. You want to work with someone who is transparent about their fees and develops a fee approach that aligns with outcomes. Increasingly consultants are using retirement plan work as a method to distribute other high-margin services, (adviser-managed accounts, IRA rollovers, custom target date funds). Look for a consultant who is upfront about their fees and can provide a clear breakdown of how expenses may change over time.

Choosing the right retirement plan consultant can significantly improve the operational effectiveness of your retirement plan. By asking these five key questions, you can make an informed decision and select a consultant who fits your company's needs.

If you are in the process of selecting a retirement plan consultant, here is an RFP template you can download with questions to help identify the critical differences in the firms you may be reviewing.

Multnomah Group is a registered investment adviser, registered with the Securities and Exchange Commission. Any information contained herein or on Multnomah Group’s website is provided for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.   Investments involve risk and, unless otherwise stated, are not guaranteed.  Multnomah Group does not provide legal or tax advice.  Any views expressed herein are those of the author(s) and not necessarily those of Multnomah Group or Multnomah Group’s clients.

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