These is just the first two questions on the minds of most Plan Sponsors, questions that you’ve probably wondered about if you manage the retirement plan at your office, but questions that maybe you didn’t know that you could ask (or didn’t know were legal to ask). We’ll add new questions in the coming weeks.

__________________________________________________________________________________________________

Why should you pay your advisor more just because the market goes up?

If you’ve agreed to pay the advisor a percentage of plan assets then you pay more as the plan grows. But why? I know, it almost seems illegal or sacrilegious for me to ask the question. Scandalous even. And I’ll probably get kicked out of the “Advisor Country Club” or have my lifetime membership revoked in the “Chartered Life Club.” But why wouldn’t you simply pay your advisor a flat fee? Does his or her liability increase or work increase with the increased assets? Not substantially. If you hire twice as many employees the work might be more demanding, but if your assets grow without increasing your employee count your plan has actually become more cost efficient and should be less money.

SPOILER ALERT: The primary determination of cost is the Average Account Balance, so as assets increase the cost should decrease unless the employee count also increases.

Why would you pay an advisor who won’t “get their hands dirty” with participant meetings?

It seems like you have to deal with one of two extremes. Either you have advisors lining up at the door to speak with your participants because they see them as a sales opportunity. Or you have advisors who only want to meet with the Retirement Plan Committee in the Board Room each quarter. They won’t talk to your employees at all. Ironically, most of the Top Flight Advisors who really specialize in retirement plans take the second approach, and if you had to choose one or the other you’d definitely choose a robust “Board Room Approach” over turning your education meetings into sales meetings …

But why does it have to be one of those two extremes? Serve the trustees of the plan and ignore the plan participants? Or serve the employees of the company and ignore the trustees and the prohibited transactions against turning the educations meetings into sales meetings?  

Why?