I met with a prospective 401k client. His plan's advisor fee was incredibly low and, in fact, below industry minimums. How this came about, I cannot say. He astutely noted that if he is to hire me, his advisor fee will go up. That is correct. His current advisor fee is the equivalent of someone working for free. But how should I go about telling him my fee, my services, and inherently, my worth?
Fee sensitivity is often where otherwise rational plan decisions stall. Fee benchmarking can help with this conversation. Benchmarking, when used correctly, reframes that conversation from “cost” to “value received for a reasonable price.” The distinction is critical.
Fee benchmarking is not about proving that a plan is expensive or cheap; it is about establishing a defensible market range for similarly situated plans—by size, complexity, participant count, and service model. When a sponsor sees that their current fees sit materially below that range, it can initially feel like a win. In reality, it raises a more important question: what services, risk management, or outcomes might be under-delivered at that price point? Or, if the plan is getting a boatload of appropriate services for a ridiculously low fee, why is that?
Benchmarking creates context. It anchors expectations and allows an advisor to position their fee not as an increase, but as an alignment with the level of service required to prudently manage the plan.
In that sense, benchmarking becomes a value articulation tool. It allows you to demonstrate that your fee is not arbitrary—it is consistent with a service model that includes fiduciary oversight, governance support, participant outcomes, and ongoing optimization. Sponsors are not simply buying “advice”; they are buying process, documentation, and risk mitigation. Particularly in a post-litigation-conscious environment, that matters.
My $0.02? The benefits of a skilled 401(k) advisor fall into three primary categories: fiduciary risk management, plan optimization, and participant outcomes. First, fiduciary support. Advisors help structure and document a prudent process—investment selection, monitoring, fee evaluation, and committee governance. This is not theoretical; it directly addresses litigation exposure and regulatory scrutiny. Second, plan design and cost efficiency. A good advisor often offsets their fee through improved share class selection, vendor negotiations, and plan design enhancements such as auto-enrollment or re-enrollment strategies. Third, participant engagement and outcomes. Better education, advice frameworks, and behavioral nudges can meaningfully improve deferral rates, diversification, and retirement readiness. That is the end objective, and it is frequently undervalued in fee-only comparisons.
That said, is there a space for the plan sponsor who wants to do it themselves? DIY is not inherently wrong. It can be appropriate in specific circumstances. A small plan with a highly engaged, knowledgeable sponsor who is willing to dedicate time to fiduciary duties may be able to operate effectively without an advisor—particularly if the plan uses a bundled provider with strong default options and governance tools. Similarly, organizations with internal investment expertise or access to institutional resources may replicate some advisor functions internally. Then again, as a Boston-based plan sponsor said to me, "Timothy, I do not have time to learn your investments language. I need to be raising money!". Fair point.
DIY begins to break down as complexity increases. Larger plans, those with multiple payroll systems, high employee turnover, or custom plan design features introduce operational and fiduciary risk that is difficult to manage without dedicated expertise. More importantly, most sponsors underestimate the time and discipline required to maintain a defensible fiduciary process over years—not quarters.
The Parting Glass
Low fees, in isolation, are not a victory. Appropriate fees for appropriate services—clearly benchmarked and transparently communicated—are what define a well-run plan. An advisor’s role is to make that equation explicit. When done well, the conversation shifts from “why does this cost more?” to “what outcomes and protections are we gaining for a fee that the market itself validates?”
That is a far more durable position.