Why a 401K Financial Advisor?

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Why a 401k Advisor

The United States government in the 1980s introduced several tax-deferred savings to increase individual saving for retirement. Ideally, the two options which generated the most attention were Individual Retirement Accounts (IRAs) and 401k plans. Though IRAs and 401k plans are similar since they both allow an individual to deduct contributions from taxable income. Furthermore, also allow tax-free accrual of interest on assets held within the plan till withdrawal. Its noteworthy that workers in organizations offering plans are eligible for participation, while participation in IRAs is open to everyone. So why do you need a 401k Financial Advisor?

Deferral Plans

Most people are familiar with salary deferral, of which the best known are 401k plans. Specifically, in salary deferral plans you put part of your earnings into a retirement savings account. All while your employer optionally contributes to your account as well. Furthermore, these plans are generally self-directed hence you’re responsible for deciding how to invest the money in your account. The monies each participant receives upon retirement is left up to the investment performance of their contributions. Despite plans such as IRAs, profit sharing plans, and money purchase plans, the 401k is by far the most popular.

401k Maintenance

When asking why a 401k financial advisor is necessary, we need to understand maintenance of a 401k plan. In retrospect, maintenance of a 401k plan is difficult enough. This is due to many specialized tasks, such as the ongoing monitoring of a plan provider and ensuring that the plan is up to date with industry developments. Furthermore, reviewing fees to ensure that they remain reasonable and dealing with unexpected issues. Additionally, with new legislation and ever-more-complex rules passed, provider platforms have enhanced with more features and services. These range from expanded investment options to enhanced pricing options.

Plan Sponsors

Generally, while Plan vendors/administrators supply and maintain your 401 k, it’s an employer that sponsors it. Furthermore, 401k plans are supplied by a vendor typically supplies the plan itself and all its related documentation. Investments for a 401k plans can be supplied by the vendor, another party or the investment custodian. Additionally, employers offering 401k plans typically hire service providers or 401k financial advisors to operate the plans. And these providers typically charge fees for their services. These advisors further can help with tax-efficient investing strategies and advice on basics like giving company stock.

Why a 401k Financial Advisor

As mentioned before, the 401k landscape is more dynamic nowadays than ever. Hence, it makes it essential for plan sponsors to work with a 401k advisor who specializes in this marketplace. Generally, a 401k financial advisor can periodically review plan services, features and expenses. They can help in investment choices and education. Additionally, helping to resolve day-to-day issues and suggest potential plan enhancements consistent with legislative changes and industry trends. Your 401k financial Advisor will offer professional guidance helping you uncover and assess your needs and later evaluate provider proposals. This is just the tip of the iceberg, let’s discover more.

Fiduciary Education

A 401k financial advisor will provide fiduciary education and support to help plan sponsors meet their obligations under ERISA. Employee Retirement Income Security Act (ERISA) helps protect 401k plan participants’ rights and retirement savings, the watch dog! They will serve as Fiduciary Advisors to help plan sponsors mitigate their liability, plan cost analysis and benchmarking. All ensuring the plan has a competitive and optimal investment line-up. Furthermore, employee education helps plan participants maximize their retirement accumulations the best way possible.  They assist in vendor searches ensuring the plan has cost effective, technology proficient, administrative and record keeping services.

Managing Fiduciary Responsibility

Managing fiduciary responsibility nowadays is no easy task, especially in today’s regulatory environment. A 401k plan sponsor is the plan fiduciary and a fiduciary’s responsibilities under the rules of ERISA are paramount. As a plan sponsor, how do you demonstrate that you’ve fulfilled your legal obligation under ERISA? Sadly, many plan sponsors feel overwhelmed in trying to manage their fiduciary obligations. These obligations are why most plan sponsors seek the assistance of a 401K financial Advisor. With hundreds of potential vendors willing to administer your plan, without the guidance of an experienced 401k financial Advisor. Evaluating and selecting the appropriate provider can be confusing and time consuming. 

ERISA Motivation

Despite ERISA is always on the lookout, don’t forget choosing an appropriate menu of investments is challenging. How do you select investments that best meet the needs of your employees? Do you continually monitor the funds to make sure that they are appropriate? Are expenses reasonable? These issues can be an overwhelming burden to 401k plan sponsors especially, under ERISA’s “prudent-person rule,”. This rule states that a plan fiduciary who isn’t qualified to make informed investment decisions must always seek expert assistance. A 401k Financial Advisor should have the tools and resources to help you make the right investment decisions.


 In conclusion, a 401k advisor will assist you in establishing an investment policy statement and analyze your investment options. Furthermore, they help in establishing a framework for monitoring investments which includes review of performance and expenses. Additionally, they help you understand 401k fees and give guidance in achieving higher employee participation and deferral rates. This can be by conducting enrollment meetings, providing investment education and suggesting potential plan-design enhancements.

Executive Assistant and Content designer at T3 Direct LLC I have tailored my skills in all verticals of marketing & business development. I have mastered a niche in Lead Generation, Digital Marketing, organize/develop projects, team development, data analysis, & excellent customer service.

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