10 Things to Avoid When Hiring a Qualified Plan Advisor

Selecting the right qualified plan advisor is a critical decision that can significantly impact your company's retirement plan success, participant outcomes, and fiduciary risk management. As retirement plans face increasing regulatory scrutiny and complexity, working with a knowledgeable, ethical advisor has never been more important. Before making this crucial decision, be aware of these ten common pitfalls to avoid.

1. Prioritizing Lowest Fees Over Value

While cost-efficiency is important, selecting an advisor based solely on the lowest fee structure can be a costly mistake in the long run.

What to avoid:

• Choosing the cheapest proposal without evaluating the scope of services

• Failing to understand the advisor's fee structure (asset-based, flat fee, or hybrid)

• Not recognizing when "too good to be true" pricing signals limited service offerings

Better approach: Evaluate the value proposition by comparing detailed service agreements against fees. Consider what level of support your plan requires and ensure the advisor's services align with those needs. The lowest-cost advisor may not provide the comprehensive support required for proper plan management.

2. Neglecting to Verify Fiduciary Status

Not all retirement plan advisors serve as fiduciaries to your plan, which has significant implications for their legal obligations and the advice they provide.

What to avoid:

• Assuming all advisors automatically accept fiduciary responsibility

• Not getting fiduciary status commitments in writing

• Misunderstanding the difference between 3(21) and 3(38) fiduciary services

Better approach: Request a clear, written explanation of the advisor's fiduciary status. Understand whether they serve as a 3(21) co-fiduciary (sharing responsibility for investment recommendations) or a 3(38) investment manager (taking discretionary control and primary liability for investment selection).

3. Overlooking Relevant Experience and Specialization

Retirement plans have unique requirements that differ substantially from individual wealth management or other financial services.

What to avoid:

• Hiring a generalist financial advisor without specific qualified plan expertise

• Not asking about experience with plans similar to yours in size and industry

• Failing to inquire about the advisor's retirement plan client retention rate

Better approach: Look for specialized credentials such as Qualified 401(k) Professional (QKA), Certified Plan Fiduciary Advisor (CPFA), or Accredited Investment Fiduciary (AIF). Ask about their experience with plans similar to yours in terms of size, industry, and complexity. Request references from clients with comparable plans.

4. Disregarding Conflicts of Interest

Many advisors operate with inherent conflicts that may influence their recommendations, even when acting as fiduciaries.

What to avoid:

• Not asking about proprietary products and revenue-sharing arrangements

• Overlooking relationships between the advisor and record-keepers or third-party administrators

• Accepting vague answers about compensation sources

Better approach: Request a detailed disclosure of all potential conflicts of interest and compensation sources. Ask specifically about any financial incentives the advisor receives for recommending particular investment options, record-keepers, or service providers. Consider independent advisors who minimize such conflicts.

5. Accepting Limited Investment Oversight

Investment monitoring is a core function of a qualified plan advisor, but approaches and methodologies vary widely.

What to avoid:

• Working with advisors who provide only annual investment reviews

• Accepting cookie-cutter investment lineups without customization

• Not asking about the advisor's investment performance benchmarking process

Better approach: Ask for samples of investment review reports and the specific criteria used to evaluate fund performance. Understand the frequency of reviews and how decisions about fund replacements are made. Look for advisors who take a proactive approach to investment monitoring rather than simply reacting to prolonged underperformance.

6. Ignoring Participant Education Capabilities

Even the best-designed retirement plan will fall short if participants don't understand how to use it effectively.

What to avoid:

• Assuming all advisors provide comprehensive participant education

• Accepting generic education materials without customization

• Not inquiring about advisor availability for one-on-one participant consultations

Better approach: Ask to see samples of education materials and review the advisor's participant education strategy. Determine whether education is delivered in person, virtually, or through digital tools. The best advisors offer multi-channel approaches and measure the effectiveness of their education programs through improved participation rates and contribution levels.

7. Failing to Assess Technology and Reporting Capabilities

In today's digital environment, technology infrastructure significantly impacts service quality and plan administration efficiency.

What to avoid:

• Not reviewing the advisor's reporting capabilities and client portal

• Overlooking integration capabilities with your record-keeper and payroll systems

• Accepting generic reports without customized analysis for your plan

Better approach: Request demonstrations of the advisor's technology platform, particularly any client-facing portals or reporting tools. Ask about their ability to provide customized reporting for committee meetings and how they leverage technology to identify plan improvement opportunities.

8. Undervaluing Plan Design Expertise

Strategic plan design can dramatically improve participant outcomes while maximizing tax advantages for business owners and key employees.

What to avoid:

• Selecting advisors who treat plan design as a one-time decision

• Not asking about experience with advanced plan design features

• Missing opportunities for plan design optimization based on company demographics

Better approach: Inquire about the advisor's approach to ongoing plan design review. Ask for specific examples of how they've helped similar clients optimize their plans. Look for advisors who proactively suggest design improvements rather than simply administering the status quo.

9. Overlooking Compliance Support Capabilities

Retirement plan regulations are complex and constantly evolving, creating substantial compliance risks for plan sponsors.

What to avoid:

• Assuming compliance is exclusively the record-keeper's responsibility

• Not asking about the advisor's role in preparation for DOL or IRS audits

• Failing to understand how the advisor stays current with regulatory changes

Better approach: Clarify the advisor's role in ensuring plan compliance and how they complement the record-keeper's compliance functions. Ask about specific support provided during government audits and how regulatory updates are communicated. The best advisors serve as an added layer of compliance oversight, not just investment consultants.

10. Choosing Based on Personality Without Due Diligence

While rapport is important, allowing personal chemistry to override objective evaluation can lead to suboptimal advisor selection.

What to avoid:

• Selecting an advisor primarily because they're likable or well-connected

• Skipping formal RFP processes because someone came highly recommended

• Not conducting proper background checks on the advisor and their firm

Better approach: Implement a structured selection process with clear evaluation criteria. Conduct thorough due diligence including background checks, regulatory record reviews through FINRA's BrokerCheck or the SEC's Investment Adviser Public Disclosure database, and speaking with multiple references. Remember that the most personable advisor isn't necessarily the most qualified.

Conclusion

Selecting a qualified plan advisor is one of the most consequential decisions plan sponsors make. By avoiding these ten common pitfalls, you can significantly improve your chances of finding an advisor who will enhance your plan's effectiveness, reduce your fiduciary risk, and help your participants achieve retirement security.

The right advisor serves as a true partner in managing your retirement plan, bringing specialized expertise, fiduciary protection, and a service model aligned with your plan's specific needs. Take the time to conduct thorough due diligence—your company and your employees' retirement outcomes depend on it.