Individual Investment Advisor Payment From Personal Accout

[Guest AnonymousAttorney]

The following questions was previously posted:

In information published by the DOL, it seems that the payment of investment advisory fees with plan assets is o.k. However, what if a participant goes out on his own, hires an investment advisor to assist with his investments in his 401(k)? This plan is a participant directed 401(k) where all employees use the same 21 funds. The employee feels overwhelmed and has hired a personal investment advisor to review his 401(k) account and provide investment advice for a fee. All plan participants have this same opportunity to use an outside investment advisor. Can the participant ask that the fees associated with this be paid from his account balance? In other words, could the investment advisor fees be paid from his account when this is done on an individual basis, and not an employer initiated/plan basis?

I am now investigating the same scenario and wonder if anyone can provide any comments, guidance, authority, etc.

[Jim Chad]

Maybe I can start the discussion by thinking on paper.

First: the employer sponsors the Plan. He is the only one that can pay fees out of Plan assets. If the adviser sends the bill to the employer and the employer cooperates, I think it would be legal. FWIW I think it would be the same as paying my TPA fee for a loan.

What do you all think?

[jpod]

It is a plan expense that at least MAY be paid with plan assets, if the plan so provides. Even then, however, I would hope that the responsible plan fiduciary has some discretion as to which expenses will be paid with plan assets and which will not be paid with plan assets. If I were that fiduciary I would not feel comfortable paying any Tom, Dick or Harry investment advisor with plan assets, even if those assets come out of the account of the participant who retained that Tom, Dick or Harry. For example, what if the advisor had a relationship with the plan or the participant that created a pt which was not cured by an exemption? What if the advisor had a really lousy track record?

[Bird]

Can the participant ask that the fees associated with this be paid from his account balance?

Sure, he can ask...

Seriously, I think it is ok, but probably a royal PITA, so if I'm the TPA, don't ask for my help in getting it accomplished.

As an aside, this concept of paying someone extra to manage funds irks me. I'd first ask if there's a broker involved in the case, and let that person earn his or her money.