It is fairly common for employer-sponsored retirement plans (401(k)’s, 403(b)’s) to hire an investment advisor as an additional benefit to Plan participants.  An investment advisor can provide various ancillary benefits to the Plan, such as assistance, education, and advice to Plan participants, and oversight and discretion over the Plan’s investment lineup.

It is important to note, however, that not all investment advisors are created equal; meaning, not all advisors are held to the same standard.  While there are some advisors who are required by law to act in the best interests of Plan participants (called a Fiduciary standard), other advisors provide advice or recommendations to participants that may primarily serve the best interests of themselves or their advisory firm (called a Suitability standard).  Adherence to a Fiduciary standard is not only critical to the level of trust that a Plan Sponsor and Plan participants give to their advisor, but it can also substantially reduce the amount of risk that the Plan is subject to.

As a result, a common question that is asked is: “How do I know if my investment advisor is acting in my best interest?”  Below is a list of the Top 8 ways that you can help to make this determination.  Remember that you can always ask your advisor any of these questions if you are unsure of the answers.  Knowing the answers to these questions can help you to assess the level of risk that your Plan, or your individual investment account, is exposed to.  Is your advisor truly working in your best interest?

  1. How is your advisor paid? An advisor who is functioning under the Suitability Standard is oftentimes a commissioned salesperson, and therefore, may not be acting in your best interest.
  2. Does your advisor have discretion over Plan assets? An advisor who has full discretion will typically have co-fiduciary responsibility to the Plan.
  3. Do you understand what fees are being paid from your account? Your advisor should be able to provide you with your Plan’s fee information in a clear and transparent manner.
  4. Are Plan fees regularly benchmarked for reasonableness? A Fiduciary advisor is required to benchmark fees annually (at a minimum).
  5. Is your advisor’s firm subject to a regular audit by a third party? Regular audits by independent, third-party firms, such as CEFEX, will examine if your advisor is abiding by Fiduciary best practices.
  6. Does your investment advisor have a regulatory blemish on their record? You can research your advisor’s history of disclosure events (regulatory issues, customer complaints, etc.) by visiting
  7. What industry credentials (and ongoing educational requirements) has your advisor obtained? Licenses, credentials, and certifications can help you to identify if your advisor is truly a subject matter expert, rather than just being an advisor by name.
  8. What processes (technology) does your advisor utilize for decisions, advice, and recommendations? It is critical that an advisor follows a defined, documented, and repeatable process for investment-related (and other) decisions that are made.