Do I need a financial advisor for my 401(k)?

Using a financial advisor for a 401(k) can help you choose a fund and determine proper asset allocation. Still, there are some conflicts of interest you need to be aware of, and not every advisor will be able to help you.  

Summary  

Do I need a financial advisor for my 401(k)? 

Using a financial advisor for your 401(k) is optional. You can choose investments and asset allocation yourself, but a financial advisor can provide valuable advice for your 401(k) in several ways. However, there are also some conflicts of interest created for financial advisors.   

A 401(k) is held with a provider your employer selects, which means a financial advisor can’t select investments or determine allocation in the 401(k). If you’re able to find an advisor who will work with you on your 401(k), it’ll be up to you to implement their suggestions. 

A financial advisor who earns money through the AUM (assets under management) model or from commissions may not be able to offer advice because they can’t make money on it.  

If you want to avoid this type of conflict, you may want to look for advisors who are “fee-only” or “advice-only” advisors. These advisors charge a fee for their advice without managing the 401(k).   

What does a financial advisor do for a 401(k) plan? 

Once you find an advisor, you might wonder what advice a financial advisor can give you for your 401(k).  

Sean Mullaney, CPA, a financial planner in Woodland Hills, California, says if they’re an advice-only advisor, they can help in two major ways. 

First, they can help advise you on your employer’s offerings. “An advice-only financial planner might work with a client to propose an investment allocation within their 401(k) based on the investment menu of that particular 401(k),” he says. 

“The investment allocation recommendation should consider the entirety of the client's financial and investment situation to craft the investment allocation recommendation.” 

Second, they can help you decide what to do with the 401(k) during a job change or at retirement.  

“There can be three potential options on the table,” Mullaney says, “Keep the money in the old 401(k), move the money into the new employer's 401(k), or move the money to an IRA.”  

“An advice-only financial planner can help clients assess the pros and cons of each potential option,” he says. 

What are the pros and cons of using a financial advisor for my 401(k)? 

Weighing the pros and cons of using a financial advisor for your 401(k) can help you make a decision.  

Pros of using a financial advisor for my 401(k) 

Cons of using a financial advisor for my 401(k) 

How can I find a financial advisor for my 401(k)? 

The U.S. Department of Labor advises consumers to find an advisor who can act as a fiduciary for their 401(k). As fiduciaries, advisors cannot be paid for their advice, which would create conflicts of interest.  

In addition to someone who understands the laws and regulations for 401(k) plans, you may want to ask some of the following questions when choosing an advisor: 

Asking these questions can help you understand the advisor’s position and their ability to help you.  

What else can a financial advisor help me with? 

Financial advisors offer a wide array of services. Some specialize in one area or another. In addition to advising on your 401(k), you can also use a financial advisor for: 

And much more. Financial advisors should help you clarify your financial goals and implement a plan to help you reach those goals.  

Get expert financial advice 

You don’t have to hire a financial advisor for your 401(K), but if you do, you can be more confident in making decisions about investment options in your 401(k). You’ll likely need to find a financial advisor who operates as a fiduciary.  

If you want an easy way to talk to an advisor, Unbiased can connect you to a qualified advisor who can meet your needs.  

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