The simple answer to that is... maybe. It will depend upon a number of things.
First, if your financial advisor actually represents the plan or has been hired by your company to manage employee plan accounts - then the answer is likely yes. However, this individual (and/or their firm) also is considered the "plan fiduciary" and accepts compliance responsibility - not only with the SEC, but also with the Department of Labor and must comply with ERISA laws and all the government agencies that enforce those laws. So - the simple answer is - IF they directly represent the plan itself, then usually the answer is yes.
However - if your advisor is NOT directly related to the plan itself - for example, they are your personal financial advisor - then the answer is again - maybe. The advisor MUST be registered as an Investment Advisor Representative under the Investment Advisor's Act of 1940. The licensure required is a Series 65 or 66, depending upon which state he practices in. In addition to that, his FIRM must also allow this activity, and it must be declared on their Firm Brochure (otherwise known as Form ADV Part 2). You can find that document on the SEC's website by searching for investment advisors - once you find it, look for "Firm Brochure" on the menu on the left.
Some firms allow (and supervise) this service, and others do not. Typically, the larger brokerage houses (wirehouses) do not allow it because it is difficult to supervise on a large scale. Independent firms, firms that charge financial planning fees, or firms that specialize in a more "comprehensive" wealth management or financial planning, typically DO allow it. Your financial advisor will not be able to withdraw fees directly from the account, however - he or she will have to invoice you for this work. It may be deductible from your taxes. Some advisors will log directly into your plan and manage the account continuously, provide performance reporting and asset allocation reporting as a part of this service. Our firm provides this "turnkey" approach for clients who desire it - as long as the plan's platform prevents anyone but the employee from taking money out. (This is called a "custody check").
Other advisors will provide you with recommended trades and you must enter them yourself. This is common if the plan has access to other data that might be of a private nature (such as health benefits). In this type of structure, performance reporting is usually not provided, since there is no live data feed and calculating performance on an account that has continuous cash flows is extremely complex.
My advice to you is to simply ask your advisor. If he or she gives you a direct and confident answer, then their answer is probably the right one. If they don't know... or they have to check... then you are likely the "first." Better to NOT be the guinea pig on this... it requires a systemic approach, workload management, security, and some infrastructure to do to do a good job at it.
Jon Castle http://www.WealthGuards.com
Advisors can manage their client's 401k or 403b accounts in one of two ways, indirectly or directly.
Indirectly - Simple advice or input is given by your advisor after looking at your 401k statements. The advisor does not have direct access and relies solely on statements provided by you the client/participant.
Directly - In depth advice or input can give given by your advisor because he/she has direct access to your 401k account. Your advisor can review the 401k account without requesting statements or access from you the client/participant.
The ability of your advisor to directly manage your 401k generally will depend on two things.
Does the custodian of your 401k plan (ie Fidelity, ING, Vanguard...) allow direct advisor access?
If yes, then does your advisor have a contract or agreement with your 401k's custodian for direct access?
These contracts or agreements with custodians for direct access are much easier to obtain and more common with independent advisors or RIA (Reg Inv't Advisor) firms than larger institutions like Merrill Lynch, Morgan Stanley or Edward Jones. For example, my RIA firm and myself personally have contracts with several of the major 401k and 403b custodians (Vanguard, Fidelity, TIAA-CREF, ING, Nationwide...) so I can directly manage their accounts with my clients.
The capabilities of each advisor with direct access will be determined by the individual 401k or 403b plan. Some examples are:
Some 401k plans allow the advisor to bill directly from the participant's account while others only allow a direct bill or invoice mailed to the participant.
Some 401k plans allow complete access to the advisor (view account, place trades, re-allocate...) while other plans only basic access (view-only).
While it can be wise to utilize an advisor for help with your 401k, remember to ask him/her these two questions:
Will you get paid? If so, how much and how will it be billed?
What will you be doing in my 401k account that is not already being done or I can't easily do myself?
An example of this conversation I have with my clients goes like this. "I charge 1.00% for my full array of services and advice. Half of the value I add is in the vast selection of available investments. The other half of my value added comes from the allocation of those investments and the personal help in managing those investments with wise decisions (ie Buy Low Sell High, diversify, react instead of predict...). If your 401k plan allows us to choose any investments, then I charge 1.00% because I can add my full value to your account. But if your 401k plan only allows you to choose from their standard/limited lineup of investments, then I only charge 0.50% because I can only add half of my potential value to your account."
Just like anything else you spend money on, base your decision to let your advisor manage your 401k (if he/she can) on a clear explanation of what you're are getting in return. And I completely agree with Jon Castle, it's rarely a good idea to be your advisor's guinea pig. I know that's a lot of 1-2's, but hopefully that helps you visualize this process.
Brad Raines Invest With Purpose www.AppliedCapital.com
Pat you are getting quite a few answers, really your advisor can help you with your 401k plan, what it really comes down to is how.
We clear through LPL and LPL allows us to charge an hourly fee to help you with management of your 401k plan. Now not every planner gets a green light from LPL to do this, you have to be in the industry for at least 8 years and there are other requirements. We also use this Financial Planning tool, called Emoney. Through emoney you are actually able to log in to your 401k plan and this allows you and us to see your positions and be proactive with you, when we feel a change needs to be made vs. waiting for you to call us.
So as you can see its possible but some planners might not have the right technology to be effective. I hope this helps If you have any questions please feel free to reach out to me Sincerely Michael
Pat, There is one issue that no one has mentioned (or at least not in any great detail). In most cases, if the broker/advisor who sold the company its plan is an insurance agent or stock broker, but not a Registered Investment Advisor, he or she will likely not be able to provide you anything more than generic investment information... not advice that's customized to meet your individual needs, goals and risk tolerance. The reason why is because when advisors provide specific investment advice, they and the firm they work for are liable for the advice. Most insurance companies that offer 401K plans don't want their brokers giving specific, customized investment advice. Even many brokerage firms don't want their brokers who are not registered investment advisors or operating under the firm's registered investment advisor to provide specific advice. Some firms like LPL are the exception. So, any advisor who is a Registered Investment Advisor or working for a RIA can manage the assets in your 401K plan, either directly or via instructions and advice that you implement on your own. Please let me know if you have any follow up questions.
That depends on a lot of things. The simple answer is yes, even if it isn't the traditional way of managing an account.
You can meet with your advisor, go through you investment options in you 401k and ask for their input on how to allocate your 401k.
The caveat to this is that I know there are a lot of advisors who don't really do this and may give you some very basic recommendations, but that may not be in your best interest.
If your advisor is fee-only, their recommendation is probably going to be stronger and more in your interest than another advisor in my personal and professional opinion.
If you have questions let me know. I used to live in Chesterfield and our office is in Des Peres. You can look up our company online: www.chamberlin-group.com
Hi Pat! There is no reason why your advisor should not be able to manage your 401(k) account. The question is how will he/she be paid for it. Some advisors charge by the hour, some by the dollar amount of assets that they manage. Ask your advisor how they normally handle this request. Good luck!
There is no reason why not if you want him to. He probably can't collect management fees from the 401k, so there will need to be some other means of payment. You may also ask youself whether it is worth the money - since most 401k plans have so few fund choices anyway, you may be just as well paying an advisor once to setup a suitable asset allocation, then using your auto-rebalance feature (most 401k's have this tool) to keep it properly allocated.