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A Checklist of Questions for Your Plan Advisor

You have a lot to do when it comes to running your business.  Any time you spend managing your 401k plan may seem like too much.

With this in mind, though, you still need to know what’s going on with your plan.  Why is your fund lineup structured the way it is, how much do you pay in service fees, are your fees reasonable and competitive, does your plan receive good value for the money, is your plan operating in a compliant manner, etc…

If you are like most smaller and mid-sized employers, you likely contract with an adviser to provide guidance on your plan.  In addition, your adviser might work directly with your employees. If so, most would agree that this represents an endorsement of your adviser’s guidance.  It’s important! Many of your employees’ current financial decisions, based upon your adviser’s recommendations, will impact their future.

Providing this type of guidance is a nice perk.  You should also benefit, in theory, from the good financial health of your employees.  But is the guidance smart and sensible?  Or confusing? Does your adviser use product hype or absurd assumptions?  Does the guidance promote other investment products that will benefit the adviser? 

With your limited time, you can use this simple list of questions to better understand the guidance your adviser offers:  

DO YOU ADVOCATE MARKET TIMING?

WHAT INTEREST RATES DO YOU USE IN RETURN PROJECTIONS?

HOW DO YOU DISCUSS THE FUTURE OF SOCIAL SECURITY AND MEDICARE?

WHAT TARGET AMOUNT DO YOU USE FOR RETIREMENT INCOME?

HOW DO YOU CONDUCT AN ENROLLMENT MEETING?

WHAT IS YOUR PHILOSOPHY ON PAYING DOWN DEBT VERSUS INVESTING IN A RETIREMENT PLAN?

WHAT DO YOU THINK OF TERM LIFE INSURANCE OR PERMANENT LIFE INSURANCE?

HOW DO YOU PRESENT AND DISCUSS RISK?

WHAT IS YOUR APPROACH TO DISCLOSING PLAN FEES AND GENERAL INVESTMENT FEES TO EMPLOYEES?  

WHAT KIND OF FORECASTING DO YOU USE?

HOW DO YOU USE OR OFFER ASSET ALLOCATION MODELS?

Would it be inappropriate for you to ask these questions to your adviser and get their answers in writing?  Not at all!  This is a great opportunity.  By asking just a few of these questions to current or prospective advisers you will learn a lot about how their guidance might benefit or hurt your employees. For all the hype and nonsense I hear in the industry, there are many times when no advice is better than bad advice.