When a wealth practice is sold, the main question is whether households follow the new advisor. With a retirement plan book, the moving parts are more formal. Each plan has a sponsor, a recordkeeper, service agreements and disclosures, and each of those has to be updated.
The plan sponsor relationship
The plan sponsor, usually the employer and its retirement committee, chooses the plan's advisor as a fiduciary decision. A new advisor typically needs to meet the committee, explain their process and service model, and be formally approved. The relationship is the most important asset in the sale, and it does not move automatically.
Advisory and service agreements
Under the Investment Advisers Act, advisory contracts generally cannot be assigned without client consent. For plans, this usually means new or amended agreements between the plan sponsor and the buyer that set out the buyer's role, whether as a 3(21) co-fiduciary, a 3(38) investment manager, or a non-fiduciary service provider.
Fee disclosures
ERISA section 408(b)(2) requires covered service providers to disclose their services and compensation to the plan fiduciary. When the advisor changes, the new advisor provides its own disclosure, and the plan sponsor should review it as part of approving the change.
Recordkeeper records
Every recordkeeper keeps an advisor of record (or broker of record) on each plan. Changing it takes the recordkeeper's own forms, often signed by the plan sponsor. Recordkeepers also control advisor access to plan data, participant reporting and, in some cases, how advisor compensation is paid.
Compensation arrangements
Advisor pay on retirement plans comes in different forms: asset-based advisory fees billed through the recordkeeper, flat fees invoiced to the sponsor, or commission-based compensation tied to a broker-dealer. If the buyer works under a different broker-dealer or RIA, some arrangements may need to be restructured rather than simply moved over.
Investment documents and committee files
Investment policy statements, fund monitoring reports, committee meeting minutes and benchmarking records support each plan's fiduciary process. Buyers usually want these to continue the plan's documentation without gaps.
What does not transfer
The selling advisor's licenses, registrations and personal fiduciary obligations stay with the seller, and the buyer needs to be properly registered and approved where the plans are serviced. Check with your compliance department about any requirements that apply to you.
A simple checklist
- A list of plans with recordkeeper, assets, participants and service model for each
- Copies of current service agreements and 408(b)(2) disclosures
- Advisor-of-record change forms for each recordkeeper
- The compensation arrangement on each plan
- Investment policy statements and recent committee materials
- A communication plan for each plan sponsor
RPPEx connects advisors selling retirement plan books with buyers who already work in this business. Listing is free and confidential.