Company hires outside investment advisor.

[katieinny]

A company has retained a large investment firm to provide plan services. Part of the package includes investment advice. However, some participants would rather use the services of local firms. Therefore, the employer has requested proposals from some local investment firms to provide investment advise only. Employees would not be able to invest plan assets with these firms. They will probably end up hiring 2 local firms for employees to chose from (other than the big firm where the assets are currently held). Employees have the option of paying for the service out of pocket or with their plan assets.

Does anyone see a problem with this type of arrangement? What if a participant gets bad advise from one of the local advisors? Since the employer hired the local firm, does that increase the company's liability if a participant's investments take a nose dive?

Would it be better if the company does not participate in hiring any local firms, but tells participants who want the advice of a local firm that it's up to them to go out on their own and pay for their services out of pocket?