Fast Food and Retirement Plans

I always feel pressured by over-eager sales people when I order at a fast food place so I usually know what I want to eat before I ever get near that counter.

Retirement plan’s are the same way.  Before you start talking with sales people, know what you want to order by considering the questions below.

1.  Decide if you even need a financial adviser.  Most 401(k) plan providers like Vanguard and Fidelity can be bought directly through those companies without the added cost of an adviser.  Call the provider directly and ask how much you save and what you typically give up by going it alone and not having an adviser.

2.  If you want a financial adviser, what do you want them to do?  Financial advisers typically fall into one of two camps:  Money managers or financial planners.  Most advisers are money managers and will tell you that their main job is to choose the best mutual funds for the 401(k) menu and monitor and replace those funds as needed.  A few advisers may show interest in providing financial planning or education for the workforce.

3.  Based on what you want the adviser to do, what are you willing to pay them? The business owner has every right to ask to see how the adviser is compensated, see an estimate of that compensation in writing, and compare that dollar amount to the services they say they will provide.  Don’t be afraid to ask what they base their compensation on.

3.  How much administrative support will you need?  Usually the financial adviser has nothing to do with day to day administration of the 401(k) plan.  The financial adviser may work for Merrill Lynch but the 401(k) plan could be provided through ING.  If this is the case, you need to find out who actually handles plan administration (like ING in this example) and ask to interview that person or persons.

Have a list of questions ready for a money manager and different questions for a financial planner.  Ask your HR team and/or payroll people to come up with seperate interview questions you need to ask the people that actually administer the retirement plan.

Know what you want to order before you ever get close to ordering a new retirement plan.