Should I Hire a Financial Advisor Before Starting a Small Business 401(k) Plan?

Image: Should I Hire a Financial Advisor Before Starting a Small Business 401(k) Plan?

Sponsoring a workplace 401(k) plan can be a little intimidating if you’re not a financial expert or you’re apprehensive about the fiduciary decisions you may be asked to make. With all the news about fiduciary standards and so many rules and regulations to follow, many 401(k) plan sponsors feel overwhelmed without help on their side. Fortunately, assistance is available. Financial advisors can act as a guiding light for plan sponsors, and hiring one may help alleviate any initial concerns or confusion you have.


Do I need to hire a financial advisor for my retirement plan?

While you are not required to hire a financial advisor when implementing an employer-sponsored 401(k) plan, there are many advantages in choosing to do so. In the broadest sense, a financial advisor is a local, trusted point of contact for the plan and can provide “face-to-face” interactions with plan participants. It also means having both a sounding board and a guide in establishing a retirement plan. Financial advisors may also provide:

  • Plan design features and strategies that include hiring/employee retention incentives, encourage conversations about participant wealth building, and provide employer guidance on tax advantages the plan offers
  • Technical support that provides ongoing plan monitoring and evaluation to keep investment options up-to-date, plan fees in line, and due diligence procedures and documentation actively maintained
  • Educational materials to help plan sponsors and participants understand their finances and utilize their 401(k) plan to its highest potential

With all these upsides, it’s easy to overlook potential downsides. However, it’s important to weigh the pros and cons before arriving at a final decision. Financial advisors cost money, and the expense you incur may ultimately increase plan fees. To accurately weigh the value of partnering with a financial advisor against the cost of the benefit, it’s essential to vet—or research—an advisor for their retirement plan knowledge and experience.

Read more: Top Five Reasons to Consider Starting a Small Business 401(k) Plan

How do I vet a financial advisor?

When selecting a financial advisor, look for someone who possesses the knowledge base to assist you with the appropriate fiduciary tasks or one who offers a retirement plan that has a fiduciary service included.

Some key criteria a potential financial advisor partner should possess includes: 

  • A thorough understanding of the laws and compliance regulations pertaining to 401(k) plans
  • A well-defined strategy for supporting the plan’s day-to-day operations
  • Assistance with preparation of the plan Investment Policy Statement (IPS)
  • A willingness to provide decision-making support in considering which decisions are in the plan participants’ best interest and identifying all possible courses of action
  • A demonstrated ability to select diversified investment offerings for your plan
  • A game plan for increasing participation rates and offering participant education

You might also be interested in: How to Evaluate a 401(k) Plan Provider

In some instances, financial advisors can help you select the 401(k) plan that makes the most sense for your individual needs and goals. However, that doesn’t mean you have to choose a financial advisor to access the benefits of an employer-sponsored retirement plan. The decision is ultimately your own, but should still be guided by the best interests of your plan participants.

At Ascensus, we work with employers of all sizes to offer retirement savings solutions—whether they have an advisor working with them or not. For additional information about how Ascensus partners with employers to find a retirement plan option that fits their unique needs and goals, contact our team of small business 401(k) specialists at 833-893-3233.