What Financial Advisors Really Do

One would think that the role of a retirement plan financial advisor is to pick plan investments. Most plan sponsors think that way and some financial advisors think that as well. Some financial advisors promote their brilliant picking of actively managed investments and I really think those that do really miss the boat of what the role of a financial advisor is.

Sometimes, I see the role of a financial advisor as the concierge at a hotel. The concierge is supposed to fix any issues and score you the sold out tickets to the show you want to go. While the role of a financial advisor isn’t the same as the concierge, it is similar because it’s a position of service. If you have a problem with your third party administrator or ERISA attorney, it’s usually the financial advisor that is called in to help.

Again, picking funds for a participant or trustee directed plan is only part of their job. A good financial advisor will help the plan sponsor pick investment options, but create a process that justifies the selection of those investments. It’s the development of an investment policy statement (IPS), review of investments against the IPS, and offering participant education and/or advice. Too many advisor pick a fund lineup and never see the client again, but they collect their quarterly fee. Those are the financial advisors that are going to get swamped because you see more financial advisors who get their role, limiting the plan sponsor’s liability in the fiduciary process. No ifs, ands, or buts.

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