Top Factors to Consider When Choosing a 401(k) Plan
Dive into the key factors to consider when evaluating a 401(k) plan provider, ensuring that the chosen recordkeeper aligns with client needs and business goals. From understanding fee structures to assessing customer service, learn what to look for when evaluating providers to make informed decisions that benefit your clients and their employees.
- Fees: Maximize value for your clients and their employees by evaluating plan pricing to ensure it's both transparent and reasonable.
- Customer Service: Look for knowledgeable and responsive support that enhances the retirement planning experience for both sponsors and participants.
- Agility: Choose a provider that swiftly adapts to regulatory changes and market volatility, ensuring your clients' plans remain compliant and supported.
With numerous uncertainties about the economy's future, many financial advisors recognize the importance of partnering with a trustworthy 401(k) plan provider that can help secure clients' futures and ensure reliable support.
However, not all recordkeepers are suitable for every advisor or every plan sponsor. It's essential to understand why advisors might switch providers and how to evaluate if your current recordkeeper meets your needs and those of your clients.
Top reasons advisors switch 401(k) plan providers
Many financial advisors have had to change the recordkeeper they were working with, and the reasons are often consistent:
High fees and expensive pricing
Operating a retirement plan obviously involves fees, but transparency and fairness are key. Advisors and plan sponsors have a fiduciary duty to ensure fees are reasonable relative to the services provided, and excessively high fees are one of the most common reasons for switching plan providers.
When comparing plan providers for clients, make sure to review the pricing and fee structure of the plan. Are the fees flat or asset-based? What are the recordkeeping and investment costs? Are they reasonable compared to the service level? Regularly evaluate these factors to determine if a change is necessary. Remember that different providers offer varying services, and sometimes a slightly higher fee can be justified by superior service and features.
Poor customer service
Clients often lack deep financial industry expertise, making reliable customer service from the plan provider essential. The provider's team should be knowledgeable, communicative, and willing to assist both advisors and clients on their retirement journey.
How to assess retirement plan providers
Discover the key steps to evaluating retirement plan providers with our comprehensive guide.
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What to look for in a good 401(k) plan provider
Whether you're evaluating a client’s current provider or comparing potential options, look for these qualities to ensure they prioritize your and your clients' best interests:
1. Simplified plan setup and processing
With many people working remotely, it's vital for recordkeepers to offer online or virtual plan setup options, including e-signatures and secure e-delivery. They should provide guides and resources to help clients navigate the setup process and offer clear forms and processes for plan sponsors. Some even provide dedicated representatives to assist with installation and conversion.
Additionally, recordkeepers should support plan design provisions, simplify updates like adding new employees, and offer integration with other benefits processes.
2. Driving employee engagement
As a financial advisor, one of your primary goals is to help your clients' employees prepare for retirement. A good plan provider should make it easy for employees to enroll, make investment changes, and request distributions or loans if allowed.
Providers should offer user-friendly websites not only for employees but also for plan sponsors and advisors. Benefit statements, reports, and notifications should be easily accessible. Additionally, engaging tools and resources should be available to help maximize retirement strategies for both clients and their employees.
3. Agility in response to changes
In today's fast-paced environment, recordkeepers need to respond quickly and efficiently to market volatility, changing regulations, and new industry rules, such as the SECURE Act and MEP/PEP arrangements. Advisors should ensure their providers are agile and capable of adapting to these changes seamlessly.
4. Strong customer care
Evaluate the level of customer care provided — not just for employees but also for plan sponsors and yourself as the advisor, as well. Support should be readily available from real people, not automated systems, so that you have direct access to someone who can provide timely and accurate assistance.
Providers should keep advisors informed about plan developments and work collaboratively to ensure the plan's success. This partnership is essential for maintaining a high level of service and ensuring that both advisors and their clients are well-supported.
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We understand what it takes to effectively manage retirement plans—and we’re here to help you succeed. Tap the links below for more information on our recordkeeping services or 401(k) plan options.
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