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Thayer Partners Blog

How to Tell If You Have a Good 401K Advisor

[fa icon="calendar"] Mar 7, 2016 9:00:00 AM / by Chris Wilmerding

Chris Wilmerding

How_to_Tell_If_You_Have_a_Good_401K_Advisor.jpgYour company’s 401K plan is a critical tool used by you and your employees to save for retirement. You know that a 401K plan will not only allow you to offer a competitive benefits package to attract and retain top talent, but run properly, it can also help you to build wealth outside of your company, on a tax efficient basis, for your retirement years.

Unfortunately, maximizing the advantages of your 401K plan isn’t an easy task. It requires a certain level of knowledge and experience that you might not have. And that’s why you hired an advisor to help you run it.

But do you know for certain that your advisor is doing his or her job correctly? That he is the type of financial advisor you need? Is your advisor truly offering you the insights and recommendations that you need to maximize the plan’s benefits? Without the right advisor on your side to help, both you and your employees will lose out.

Consider these factors that make a good 401K advisor.


The large majority (over 98%) of the 330,000 financial advisors in the United States manage less than ten 401K plans, according to the Retirement Advisor University. And 75% of these advisors manage three plans or less.

What does this mean? That most advisors don’t specialize in retirement plans. Many financial advisors simply take on the management of 401K plans because a friend, acquaintance, or family member has asked them to. They think that because they’re financial advisors, they’ll know enough to get by and run the plan efficiently enough. Why not? It’s extra work for them.

Chances are, your financial advisor is in the large majority that doesn’t specialize in retirement plans, especially if he’s a friend or was referred by one. And for this reason, he might not be the right advisor for your needs.

Consider your advisor’s credentials. Does he go to conferences? Did he dedicate the time to become accredited in this subject? Does he keep up with retirement plan best practices and trends? Does he, honestly, have much more experience than you do managing these plans? The answers to these questions can help you determine whether or not you’re relying on a good advisor.

Fiduciary Standing

An advisor who serves as a fiduciary on your plan is one that you can trust because he is personally liable for it. He holds a legal or ethical relationship of trust. Do you know if your advisor is named as a fiduciary to your plan as a 3(21) or a 3(38) fiduciary, as defined under ERISA, the federal statutes governing retirement plans? Does he have fiduciary accreditation, such as AIF® or Accredited Investment Fiduciary®?

The fiduciary duty is the highest standard of care and helps ensure that your advisor is putting your interest above his own, that no conflicts of interests exist, and that no personal profits will be made by the advisor. It also means that the advisor is responsible for making sure that the investment advice he gives is complete and accurate, that the analysis is as thorough as possible, and that he strives to trade securities with the best combination of efficient execution and low cost. When you hire a fiduciary, you’ll know that your best interests are top priority.

Communication and Involvement

Far too many business owners will say that the last time they talked to their 401K advisor was when they bought their plans. A good advisor will stay in constant and direct communication with you. He will keep you up to date, offer suggestions and advice, and will take an active involvement role in the plan’s management. A good advisor will be committed to educating you and your employees in order to garner high levels of participation and maximize the plan’s benefit.


Topics: 401k

Chris Wilmerding

Written by Chris Wilmerding

Chris Wilmerding is Principal of Thayer Partners, an independent investment management firm located in Westwood, MA providing financial planning and wealth management counsel to individuals and their families.

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