Many 401(k) plans engage advisors to provide investment guidance and fiduciary support. It is crucial for plan committees to fully understand the structure of these fees and the role of the advisor. Advisor fees can be charged as a flat fee, an hourly rate, or a percentage of assets. Beyond the fee structure, committees must determine whether their advisor is acting as a fiduciary when giving advice.

Understanding the advisor’s fiduciary status is critical. A fiduciary advisor is legally obligated to act in the best interests of the plan and its participants, which can significantly impact the quality and impartiality of the advice provided. If the advisor is not a fiduciary, their recommendations might be influenced by other incentives, potentially leading to conflicts of interest.

Another aspect to consider is whether the advisor meets with participants to provide personalized advice. If so, the committee must confirm whether the advisor acts as a fiduciary in these interactions as well. Advisors who are fiduciaries must provide advice solely in the participants’ best interests, ensuring unbiased and high-quality guidance.

Additionally, committees should scrutinize whether the advisor is recommending that participants roll over their 401(k) assets into products the advisor sells, such as IRA accounts. This practice can create conflicts of interest, especially if the advisor receives commissions or other financial benefits from these products. Ensuring transparency and understanding these dynamics is crucial to protect participants’ interests.

By thoroughly understanding advisor fees and the fiduciary status of their advisors, committees can better safeguard participants’ retirement savings and ensure they receive the best possible advice.

At Comperio Retirement Consulting, we are dedicated to helping plan committees navigate these complexities with confidence and expertise. Contact us today to learn how we can support your fee management efforts and enhance your 401(k) plan’s effectiveness.