Generalist vs Specialist- A Checklist for Your 401 (k)

If specializing is a good thing…

Most people would agree that for so much of life there is value in specializing  –  and, as such, they’d prefer to work with a generalist rather than a specialist.  Would you hire an estate planning attorney to do company’s employment practices litigation?  Hopefully not.  And there is a reason your family doctor won’t do your knee surgery.

…why don’t more companies use 401(k) specialists?

And yet so many companies allow the oversight of their corporate retirement plans to be handled by generalist practitioners  –  those who have the legally required licensing to provide advice on 401(k) plans but whose primary area of focus is “elsewhere” e.g., individual wealth management, life insurance, group employee benefits etc.  If asked, they’ll say “sure, we do 401(k)s” but, in actuality, it’s a “side business” in which they “dabble” only part of the time.

 Because…in the valley of the blind…

….the staying tells us the 1-eyed man is king.  Put simply: it’s often very hard for companies to tell the difference between a reasonably knowledgeable “generalist” who knows more than the company officers do  vs  the work of a truly focused specialist in the field of employer-provided retirement programs.  WHY is it so hard for companies to see this difference?  Because they don’t know what they don’t know  –  and, most notably, they don’t know what questions they should be asking!

Drink a 12-Pack…

Here is a “12 pack” of questions to ask yourself as you think about the consulting advice you receive around your 401(k):

Does the retirement plan consultant for our employer-sponsored retirement plan do the following?

  1. Spend 100% of their time laser-focused on employer-sponsored retirement plans?  (Or are company-provide retirement benefits an “ancillary” business line for them, handled “on the side” of their core competency?)
  2.  Advise on, and take accountability for, the totality of your plan?  (Or do they focus “just” on the plan investments?)
  3. Share in the risk of the plan by acting in a co-fiduciary capacity?
  4. Serve as a member of your plan Investment Committee (“IC”)?
  5. Clearly, transparently, in writing, disclose their fees  –  and explicitly what services are provided for said fees (including any fiduciary status they may be acknowledging)?
  6. Lead the plan governance process by establishing the IC agenda, preparing all required materials, and handling post-meeting minutes to document the fiduciary file?
  7. Establish an Investment Policy Statement (“IPS”) which is completely independent from any investment / fund company bias?
  8. Implement clear, practical, and independent processes & specific criteria for selection, monitoring, and, when needed, replacement of plan investment offerings?  (And then prepare required analysis & documentation to support your fiduciary file)?
  9. Benchmark your plan on a regularly scheduled basis to ensure costs for vendor services remain competitive?
  10. Lead the employee education process  –  and communicate to your employees in such a way that empowers them to take action confidently & make financially healthy decisions around contributions & investment allocation?
  11. Discuss contribution strategies that can have the greatest potential for “ROI” both with respect to company contribution budget as well as impacting employee “retirement readiness”
  12. Consult with you on various plan design provisions?

Author: Ben Hall, ChFC, AIF®

VP & Managing Director – JKJ Retirement Services

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