PLANADVISER - Fall 2023 - 19

efforts are affecting outcomes, also
whatever ideas he has for making time
with these employees more effective.
" That quarterly plan review is
important because it means the plan
sponsor and adviser are aligned on
the health of the plan, " Hedges says.
DIG INTO THE DATA
Once a year, advisers should go
deeper into plan data with sponsors,
looking at participations rates,
deferral rates and investment details
such as whether the glide path for
target-date funds makes sense, Hedges says. The adviser can
guide these conversations with the investment committee,
ensuring a balanced debate and prompting the plan sponsor
to properly document the conversation (see sidebar).
If sponsors have no plan committee charter in place, that
is another area where the adviser can assist and also provide
education for both new and veteran committee members on
their fiduciary status and new and upcoming regulations
that might affect their responsibilities, Bitzer says.
" We're going to explain what a good structure looks like
and help sponsors build out that structure, with committee
charters and an investment policy statement, " he adds.
" We explain the importance of having a retirement plan
committee and/or an investment committee-what they
are, why they're important and how they should function. "
Bitzer says plan advisers can, additionally, help the client
evaluate which employees internally might make effective
committee members. And he suggests advisers allot time in
a committee meeting to go over the plan's Form 5500: This
is a good opportunity to make sure committee members
understand the plan's investment options and the requirement
to make 404(a)5 and 408(b) fee disclosures.
" That [review] gives us a great idea of what the plan looks
like from a compliance perspective and from an ongoing
management perspective, " Bitzer says. " We can look at it
and, at a glance, get a pretty good idea of whether or not a
plan has certain compliance issues " -which the adviser can
then discuss with the client.
BUILD IN FLEXIBILITY
While a plan adviser should work with his clients to review
and evaluate their investments, he should also build some
flexibility into plan policies to allow for making situational
decisions that take context into account, says Brent Petty,
a partner in, and managing director and senior investment
adviser at, NWCM in Salem, Oregon.
" It's a balancing act, " Petty says. " You want to still have
flexibility to make executive decisions. Maybe an asset
manager is having a tough time, and you want to give them
an opportunity to work their way off the watch list, rather
than having an investment policy statement that is so rigid
you're forced to get out at the low and miss an opportunity to
stay with a good manager. "
" We're going to explain what a
good structure looks like and help
sponsors build out that structure,
with committee charters and an
investment policy statement. "
Such situations may have become more prevalent in the
past year or so amid a volatile market and rising interest
rates, Petty says. " [Sponsors should] want to put structure
in place, but not so much structure that [they] can't apply
common sense and work with an adviser to make prudent
decisions that factor in the present scenarios, " he says.
Similarly, a fee policy that requires going with the lowestcost
share class might leave a plan with an investment
option that does not perform as well, Petty says. Fees are
always an important factor for sponsors to consider from a
fiduciary perspective, but this does not automatically mean
opting for investments or providers with the lowest fees.
Rather, the adviser should work with clients to ensure
they are paying " reasonable " expenses, and should re-evaluate
those as the market or the client's business changes. For
example, as plan assets grow, the plan may become newly
eligible for lower-cost investments, Hedges says. " Usually
when the plan grows, the pricing should go down. "
AVOID CONFLICTS OF INTEREST
Another key area for the adviser to review with plan sponsor
clients is whether any conflicts of interest exist in the
investments their providers offer.
" There are still vendors out there that will force their
investment product into the plan, even though it may not be
the best investment product available, " Hedges says. " That
may be driving up the price of the plan or affecting performance.
Advisers can help plan sponsors ensure that they're
working with investment-agnostic providers. "
Advisers can also help sponsors determine the best
way to benchmark and evaluate new products entering the
market thanks to the passage of the Setting Every Community
Up for Retirement Enhancement Act of 2019 and the
SECURE 2.0 Act of 2022. Those products include in-plan
annuities, savings accounts and student loan matches.
Even if a sponsor client is happy with its current vendors
and conducts regular benchmarking, Petty recommends
having it go to market every five or seven years to get formal
bids for comparison with regional peers. " We think that's in
line with what the regulators want to see-that the cost of
the sponsor's investments and service providers is competitive
with [costs of companies in its] industry, or at least
reasonable, " he says. -Beth Braverman
Practice Management | Fall 2023 | planadviser.com 19
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