I always say that plan sponsors need a solid team: an experienced financial advisor, a competent third-party administrator (TPA), and a knowledgeable ERISA attorney. But let\u2019s talk about that word\u2014experienced. Like \u201creasonable fees,\u201d it\u2019s one of those terms that gets thrown around like it actually means something. The problem? It\u2019s vague.<\/p>\n
Experience isn\u2019t just about how many years someone\u2019s been in the game. Years in the business is just one data point. I\u2019ve met financial advisors with 30 years under their belt who still couldn\u2019t tell you what an investment policy statement is. Real retirement plan experience might mean how many plans a provider actually works on, how well they understand plan design, or whether they do the little things that others overlook\u2014like participant education or staying on top of fee disclosures.<\/p>\n
A few years back, a financial advisor\u2014who\u2019s made quite a name for himself\u2014pushed back when he heard I stress \u201cexperience.\u201d He had 3\u00bd years in the business and took offense, thinking I was just talking about years. He told me his commitment to doing the right thing for clients beat out plenty of 35-year veterans. My response? Preaching to the choir, buddy\u2014I\u2019ve seen what \u201cexperienced\u201d really means.<\/p>\n
Let me take you back. I spent 2\u00bd years at a law firm. We had ERISA partners who were supposedly the best in the business. But they came from the multiemployer (Taft-Hartley) world\u2014a whole different animal than single-employer 401(k) plans. Some of them didn\u2019t know the first thing about revenue sharing, plan fees, or participant education. One of these partners even served as a trustee on the firm\u2019s 401(k) plan. He never hired a financial advisor, never reviewed investments with the other trustees, and never gave participants any education. The firm\u2019s fiduciary liability? Through the roof. Would you hire that guy to advise your plan just because he\u2019s a partner and has \u201cERISA\u201d in his title? I wouldn\u2019t.<\/p>\n
At another firm, I worked with one of the top ERISA attorneys in the country\u2014again, from the multiemployer side\u2014who didn\u2019t know what revenue sharing was or why plan sponsors should care about administrative fees. Let that sink in.<\/p>\n
Same story for financial advisors. You can have someone managing a billion dollars, but if they don\u2019t have any real experience with retirement plans\u2014or worse, they\u2019ve got dozens of plans but do nothing beyond showing up for the annual review\u2014it doesn\u2019t mean much. No investment policy statement, no participant education? That\u2019s not retirement plan support, that\u2019s checking a box.<\/p>\n
And TPAs? Some are great, but others can\u2019t handle anything outside the cookie-cutter box. Daily valuation? Forget it. Defined benefit? Out of their depth. New comparability? Not a clue. Just because someone can administer a plan doesn\u2019t mean they should.<\/p>\n
The bottom line: \u201cexperience\u201d isn\u2019t one-size-fits-all. Plan sponsors need providers with the right experience for their plan\u2019s size, structure, and complexity. That doesn\u2019t always mean the longest r\u00e9sum\u00e9\u2014it means the best fit.<\/p>\n
So how do you find the right fit? Word of mouth helps. So does asking the right questions. Don\u2019t be afraid to dig. Ask about plan design experience, fee benchmarking, participant education, and compliance support. If they stumble? That\u2019s your answer.<\/p>\n
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