Is Your 403(b) Rep Working for You?

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Many educators decide they need help choosing investments for their 403(b) or 457 plans. If you’re among them, you might be looking for a financial advisor. But it’s important to keep in mind that many of the representatives who come to your school to talk about investment products have a conflict of interest: They may be earning a commission based on what they can get you to buy.

So your first step is to make sure you are getting objective advice. Instead of asking a sales representative what you should buy, think about hiring a fee-only financial advisor. Because fee-only advisors don’t receive commissions, they may be more likely to be objective about what to recommend to you. Here are a few tips:

  1. Ask what the advisor’s credentials are. Is she/he a Certified Financial PlannerTM? Registered Investment Advisor or other credentialed individual? While having credentials is no guarantee, it does indicate the individual’s level of understanding and commitment to the investment profession.
  2. Ask whether the advisor is working in a fiduciary capacity. That means the advisor is legally and ethically required to put your best interests first when making an investment recommendation.
  3. Ask how they are paid. Are they paid commissions for selling certain products, or do they only earn a fee charged to their clients for the services provided? If you can determine how they are paid, it will help you understand who they are really working for.
  4. Once you start working with the advisor, does he or she contact you regularly? You should have a review at least once a year to make sure you are on track.
  5. Can you easily contact your advisor if you have a question?
  6. What are you paying for the advice? And what are you paying in fees for the investments that are recommended?
  7. Finding an Advisor

    There are a number of ways to find an advisor. Ask friends and family if they can recommend someone they trust. You can also search for fee-only financial planners at the National Association of Personal Financial Advisors. It is also a good idea to interview multiple advisors before making a decision to work with somebody.

    For more information about choosing a financial advisor and understanding the fees you pay, download a copy of the CTA Guide to Working with a 403(b) or 457 Advisor.