Don’t Hire an Investment Advisor!
Did the headline catch your attention? I know it sounds bizarre, given that our firm provides, well, investment advisory services - but hear me out. The majority of Requests for Proposal (RFPs) that we receive are for investment advisers or investment consultants. However, the plan sponsors seeking these services almost never engage our firm for investment advisory services, exclusively.
Why? Because investment advice, whether it be on the participant or plan sponsor level, is only a small portion of the services that plan fiduciaries need to fulfill their fiduciary obligations. Other responsibilities include ensuring that plan operations conform to the precise language of the plan document, fees are reasonable and prudent, elective deferrals are remitted in a timely fashion, and all reporting and disclosure requirements on the plan are met.
Additionally, all fiduciaries, as part of the general duty to act in the best interest of plan participants and beneficiaries, should work to maximize the retirement plan account balances for participants by ensuring optimal utilization of the retirement plan benefit. These efforts often incorporate work with financial wellness providers to maximize participant savings in the retirement plan.
However, instead of hiring a firm that can provide all these fiduciary support services, some plan sponsors hire a true investment advisor; one that provides advice on the plan sponsor (and possibly participant) level but may lack the expertise to serve as a trusted advisor on all the other pieces of the fiduciary puzzle.
Now, it is true that some plan sponsors (typically large ones) hire multiple retirement plan specialists; and in in this scenario, hiring an investment advisor might work, since other specialists may be hired to provide support for the additional fiduciary duties. However, other plan sponsors may focus on an investment advisor because they feel that investments are more important than the other aspects of retirement plan administration and as such, the only area that merits hiring a prudent expert. Having been hired after the fact in this scenario to “clean up the mess,” I can unequivocally state that this is a suboptimal solution.
So, the next time you issue an RFP, look for a firm that will cover all the fiduciary bases and not simply investments.
Note: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice. Opinions expressed are those of the author, and do not necessarily represent the opinions of Cammack Retirement Group.
Investment products available through Cammack LaRhette Brokerage, Inc.
Investment advisory services available through Cammack LaRhette Advisors, LLC.
Both located at 100 William Street, Suite 215, Wellesley, MA 02481 | p 781-237-2291