Financial Advisor requirement

[wsp]

Is there a requirement that a plan have a financial advisor? Client is a law firm and are choosing a daily trading recordkeeping platform that has educational tools and asset monitoring tools built into the website. Could they avoid the fees and simply go at it alone? Would the answer change if it were a small manufacturing company?

Note this is not a should they...but a could they question.

[QDROphile]

If they think they can properly discharge their fiduciary duties without the assistance of a financial or other expert, nothing requires otherwise. Does not matter who sponsors the plan; the question is, who has the horsepower to cover the responsibilities? Who has the duty to advise about the fiduciary responsibilities and standards?

[RCK]

The other question is who wants to give up the billable hours to do the work. This will take time.

[GBurns]

Will the financial advisor be advising the law firm or the participants ?

[wsp]

Will the financial advisor be advising the law firm or the participants ?

The firm. A few of the major participants have made it clear they don't want the services. My guess (hope) is they already pay an outside financial advisor. If that's the case then no reason to pay two on an ongoing basis though I think at very least one should be retained during startup; perhaps on a fixed fee rather than basis points (large rollovers planned).

[AndyH]

Look at what you just said for your answer,

"a few of the major participants".

"my guess is they already pay an outside advisor"

What makes someone "major"? Do the "minor participants" have an advisor?

[wsp]

Look at what you just said for your answer,

"a few of the major participants".

"my guess is they already pay an outside advisor"

What makes someone "major"? Do the "minor participants" have an advisor?

major is simply one who was chosen to help "design" the plan and choose investment vehicles. Plan sponsor says yes to the advisor but other two (one NHCE) says no. So it's not a matter of plan sponsor being cheap. Plan sponsor also plans on turning over practice to one of two saying "no". Plan sponsor also has largest account balance and thus would be responsible for greatest portion.

But...immaterial now that I know can be done.

Does anyone have a plan that utilizes the services of an F/A on a per hour charge rather than basis points. Going rate for services is about $250/hr so a 2 million account would need a lot of hours to justify a 50 basis point fee (plan only has 6 participants). Better yet, how about a cap put on a service contract? 50 basis points up to 3k per year or something of the ilk. That way there's less disincentive to roll the non-managed IRA balances in.

[Guest willow]

Why not hire a financial advisor on a pure fee basis?

The Advisor could have a client service agreement that will spell out what services will be offered and how much it will cost. Then the plan sponsor can decide if they value the services or not (of course they can

always try to get the costs lowered).

Also, depending on the product platform, you may be able to use an asset based charge less than 50 bps.

In general the insurance companies can dial in the commission. The mutual funds might have a share class

that is less than 50 bps.

On a plan with $2 Million in assets, you only need 15 bps to get your $3,000/year fee.

Just some ideas

Regards,

rdcn