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The 4 Items You Should Request in an Investment Advisory Services Request for Information

When it comes to choosing a prospective investment advisor for your employees' retirement plan, thoroughly investigating the potential advisor and performing comprehensive due diligence of their firm should be a formal step in your search.

The number of investment advisory service providers in the marketplace is extensive, but not all advisors are created equal. Further, regardless of how successful or proven a potential investment advisor may be, they may not be a good fit for your plan.

The formal Request for Information (RFI) process is intended to not only help you evaluate potential prospective advisors, but to also inform plan advisors vying for your business of the services you require and the fiduciary standards they must satisfy should you choose them to administer your retirement plan. If an advisor doesn't provide services that would deem them to be a fiduciary (an individual who is legally and ethically required to act prudently and solely in the interest of the plan’s participants and beneficiaries), why would you pay them to be your advisor?

Your RFI questionnaire should clearly communicate to any potential advisors the services you require and address several things such as:​​

  • Your plan name

  • The assets included in your plan

  • Any restrictions or requirements for your plan

  • The scope of services you require from your potential investment advisor

Aside from a detailed questionnaire, your RFI should also request certain due diligence documents from the potential advisor in order to help you thoroughly evaluate their firm, their experience with other retirement plans, and their compliance with ERISA and the SEC.

Click here to download a sample RFI questionnaire.

Some of the must-have due diligence documents you should request from a potential plan advisor in an investment advisory services request for information are:

1. The advisors' audited financials

You should request a copy of the advisors' audited financials for the previous two years. A detailed record of their financials can be very insightful by helping you to determine the advisor's ability to meet their fiduciary responsibilities.

2. Proof of professional liability insurance

Your primary objectives when selecting a plan advisor is to determine if they have a history of performing duties that would deem them to be a fiduciary, as defined by the Employee Retirement Income Security Act (ERISA). Professional liability insurance safeguards investment advisors from losses due to any actual or alleged negligent act, or error/omission committed in the scope of their duties as investment advisors. You need to be certain that the advisor is willing to both serve as a fiduciary and accept professional responsibility for their actions.

3. SEC Form ADV Part 2

The Form ADV Part 2 is a formal brochure required from all investment advisers by the Securities and Exchange Commission (SEC). The form requires investment advisers to provide their clients a narrative brochure written in laymen's terms with information about their firm such as:

  • The types of advisory services offered

  • Any disciplinary information

  • Any known conflicts of interest

  • The educational and business background of management and key advisory personnel

  • ​​The Form ADV Part 2 will serve as the primary disclosure document from the investment advisor, should you select them to manage your retirement plan.

4. References

It is often said that a referral is the best kind of review. References are a fundamental step in evaluating the services of a potential investment advisor. As part of your due diligence efforts, you should request a minimum of three references. The references you request should range from:

  • A long-term relationship of more than 10 years to demonstrate commitment to the relationship, and provide proof that the advisor has evolved to the changing needs of the client

  • A more recent relationship that demonstrates the advisor's ability to effectively meet immediate challenges

  • A relationship with a current client that has needs similar to your company to provide verification that the advisor understands the unique needs of your plan.

​As a retirement plan sponsor, you are a fiduciary for your employees' retirement assets. Performing a proper and thorough due diligence of the investment advisors that you choose to manage your plan assets is a critical component of your risk management requirements and fiduciary responsibility.

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Retirement & Succession Plans

Richard Allison

Richard Allison brings more than 30 years of experience and knowledge to SWBC Investment Advisory Services. His team provides retirement plan solutions using a thorough process of investment research and providing another layer of consulting expertise to our clients.

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