In light of the highly volatile market conditions over the past few years, as well recently added regulatory disclosure requirements, plan sponsors are facing a growing level of fiduciary responsibility and risk. Many plan sponsors seek out the services of an investment consultant to provide them with much-needed assistance. Because of today’s circumstances, plan sponsors are looking for far more from their consultants than ever before.
It is no longer a matter of simply finding someone to report on performance and conduct an occasional search. Plan sponsors require someone who can also provide the knowledge and tools needed for the sponsor to fulfill his fiduciary duties and minimize his fiduciary liability. The added benefits of utilizing a good consultant are vast, ranging from improved plan design, better understanding of fiduciary duties, improved participant outcomes, and greater overall confidence and satisfaction in a retirement plan and lower risk for plan fiduciaries.
So, what exactly should plan sponsors do as they seek out a “best fit” consultant for their plan and its participants?
Retirement Plan Consultants Versus Brokers
What exactly are you looking for when you begin the search for a consultant? It is a common misconception that the duties of an investment consultant are essentially that of a broker, meaning the consultant provides general investment advice to a plan sponsor.
While a broker’s focus is on finding suitable investments and recommending a variety of transactions, an investment consultant has a broader role as a co-fiduciary. In addition to providing investment menu decision-making, consultants must have the knowledge to help plan sponsors fully understand their plan governance responsibilities and help them to avoid the mistakes that could expose them to potential liability.
Due to recent regulatory changes and Department of Labor guidance for retirement plans, these duties have become more complex and are required on an ongoing basis. Changing legislation, plan design needs, loan provisions, and other variables add complexity and burden for plan sponsors that are already over-worked and understaffed. Due to these factors, it makes sense that so many plan sponsors see such great value in the services of a consultant.
Important Considerations for the Retirement Plan Consultant Search
Before embarking on the search for a retirement plan consultant, plan sponsors should first determine if and why the service is necessary. This process involves assessing the plan’s goals and objectives and evaluating internal expertise to determine what issues or services require the attention of an expert.
If you decide you do require a retirement plan consultant, the next step is to plan a consultant search, starting with a Request for Proposal (RFP). This is perhaps the most critical part of the selection process. It is the fiduciary duty of the plan sponsor to use due diligence in the search for a consultant, requiring a prudent plan for the evaluation, selection, and ongoing monitoring of that advisor. This process should involve identifying, understanding, and benchmarking the associated costs of hiring a consultant, and measuring those numbers against the expected quality and value of the services that will be provided
There are plenty of existing consultants that can provide excellent service, and can “get the job done,” so your goal should be to seek out that “best fit” consultant for you, your committee, and your organization.
Before searching for an appropriate retirement plan consultant, it’s important to understand the services that retirement plan consultants offer. In our next post, we’ll explain the common services as well as the specialized services retirement plan consultants offer.
If you’re unsure if your retirement plan requires a consultant or would like more information about your role as a plan sponsor, we’d be happy to meet with you. Give our office a call at (949) 718-1600 or email us at email@example.com.
Important Disclosure: This content is for informational purposes only. Opinions expressed herein are subject to change without notice. Beacon Pointe has exercised all reasonable professional care in preparing this information. Some information may have been obtained from third-party sources we believe to be reliable; however, Beacon Pointe has not independently verified, or attested to, the accuracy or authenticity of the information. Nothing contained herein should be construed or relied upon as investment, legal or tax advice. Only private legal counsel may recommend the application of this general information to any particular situation or prepare an instrument chosen to implement the design discussed herein. An investor should consult with their financial professional before making any investment decisions.
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