How often should 401(k) advisors meet with plan sponsors, and what should they include in the quarterly monitoring report? While it’s a best practice to review investment options against peer groups and benchmarks on a quarterly basis, it is not necessary to meet with every client, every quarter.
The number of meetings you have with each client depends on a number of factors. First and foremost, what was agreed to with the sponsor? If you’re unsure, it often depends on whether the plan sponsor is a professional or an employer that “makes something.”
Professional practices, where most of the plan assets are in the principal’s personal accounts, actually require less meetings and typically occur annually. When it’s an employee-driven plan, more meetings are initially necessary since the plan sponsors feel a higher degree of fiduciary responsibility for “managing someone else’s money.” While some meetings can be done in a web seminar setting, most are face-to-face and can occur quarterly, semi-annually or annually.
Regardless of whether there is an in-person meeting or not, a quarterly analysis should be sent via e-mail or uploaded to the client account. There are two reasons:
- It provides proof that the necessary investment benchmarking and due diligence has been completed and no actions are necessary for the quarter in question.
- It’s another touchpoint and communication opportunity with the plan sponsor.
The information in the quarterly report also depends on a number of factors. For off-meeting quarters, begin with a review of the market results for given periods of time. This gives the reader an idea of what has occurred across many different asset classes and prepares them for an analysis of investment options; this includes an analysis of the investment options versus their respective investment policy statement objectives such as its peer group and/or index.
Since a global fiduciary monitoring system is used at our firm, any commentary for any investment option is automatically included in the report and any necessary “action” listed. If there is an investment option that warrants more conversation or change, a further call-to-action or meeting would therefore be necessary.
For the annual, semi-annual or quarterly client meetings, I provide the following information in the report:
- Overview of any regulatory or legal updates
- Market review
- Plan demographic overview
- Plan asset roll-forward
- Fee and expense breakdown and benchmarking
- Due diligence analysis using the IPS criteria
- Target-date and/or model portfolio analysis
Some of the items listed above would be considered “consulting” as opposed to investment advisory services. If you already provide or think you might want to provide some of the above mentioned consulting services, please discuss any required changes to your agreements and related 408(b)2 disclosures with appropriate legal counsel.
Mario C. Giganti, CFP®, CPA, AIFA®, is a wealth management advisor and Principal at CAPTRUST in Uniontown, Ohio. With over 21 years of experience in financial services, he specializes in comprehensive financial planning, portfolio management, and retirement consulting for high-net-worth individuals, families, and business owners. Before CAPTRUST acquired Cornerstone Capital Advisors in 2019, Mario served as its President and Chief Investment Officer, leading the firm to become one of the largest advisory practices in Northeast Ohio. Mario is an expert in fiduciary investment practices, asset allocation, and investment due diligence. He has also been an adjunct faculty member with fi360 in Pittsburgh for more than a decade, teaching “The Prudent Investment Practices” and contributing to their industry-leading publications
