When is the last time you spoke with your 401(k) adviser? If it’s been more than a year, then you’re not getting the services you’re most likely paying for, says Michael Gheen, CPA/PFS, associate director at SS&G Wealth Management LLC.
“Many plan sponsors don’t realize that if an adviser sold them a plan at any point in time, that adviser is making money off of that plan, regardless of whether or not they ever see or speak to that person again,” says Gheen. “If your adviser is not giving you any advice, you’re basically paying him or her to do nothing.”
Smart Business spoke with Gheen about how to get the most out of your 401(k) plan and your adviser, understanding the fees you’re paying and why it’s important to educate your employees about your 401(k) plan.
How can 401(k) advisers help business owners better manage their 401(k) plans?
A lot of employers, as 401(k) sponsors, don’t understand that they have an obligation not only to monitor the funds available in the plan but also to review those funds, make changes to them as necessary and educate their employees about the plan.
Often, business owners have a financial adviser who handled some personal investments for them and the adviser says he can handle the business’s 401(k) plan, as well. But that adviser doesn’t really understand all the intricacies that are involved and most likely doesn’t have the staff to handle the plan. If you’re dealing with a company with a couple hundred employees, and it’s just the adviser and an administrative assistant, it’s going to be very difficult for them to properly service your company.
Many advisers have a few plans here and there, but they don’t specialize in them. You need someone who specializes in 401(k) plans in order to get a good handle on all the inner workings of a plan and all the service that is required to properly manage that plan. You should ask: How many 401(k) plans does the adviser work on? Is it the adviser’s specialty? Does he or she have a team in place to help manage the 401(k) plan, take participant calls and handle all the questions associated with a 401(k) plan?
In addition to specializing, an adviser should actively help you in the selection of funds available in the plan, and then monitor those funds — and not just their performance, but factors such as style drift, change in fund managers, etc. — on an ongoing basis. Meetings with the adviser should take place annually, at a very minimum, to review the funds and suggest changes if necessary.
If that adviser isn’t reviewing your plan investments and isn’t coming to you with proactive design ideas, such as, ‘Let’s offer a Roth 401(k) to employees,’ or, ‘I know you as an owner are not able to put as much as possible into the plan, so let’s work with your third-party administrator to find a way to do that,’ then you’re not getting your money’s worth.
The adviser should also be holding employee education meetings at least once a year.
