Advisor Fees Explained

If your 401(k) plan works with a financial advisor — whether for investment menu design, participant education, or ongoing plan review — that advisor is being compensated, and ERISA requires you to understand how.

Types of Advisor Compensation

Asset-Based Fee (Most Common)

The advisor is paid a percentage of plan assets annually. Typical ranges for 401(k) plans:

• Small plans (< $5M): 0.50% – 1.00% of assets
• Mid plans ($5M – $50M): 0.25% – 0.50% of assets
• Large plans ($50M+): 0.10% – 0.25% of assets

Asset-based fees scale automatically with plan growth — meaning the advisor earns more each year even without doing more work. This is a common source of fee drift that fiduciaries should monitor.

Per-Participant Fee

Some advisors charge a flat fee per participant per year. This is simpler to track and doesn't automatically inflate as assets grow. Typical range: $20 – $80 per participant annually, depending on plan size and services.

Flat Annual Retainer

A fixed dollar amount per year regardless of assets or participants. Common for smaller plans or when the advisor is providing limited, defined services.

Revenue Sharing / 12b-1 Fees

Some advisors receive indirect compensation from mutual fund companies — a share of the fund's expense ratio passed back to the advisor. This is called revenue sharing or a 12b-1 fee. These must be disclosed in the 408(b)(2) disclosure, but many plan sponsors miss them because they don't appear on an invoice.

What Must Be Disclosed

Under 408(b)(2), advisors acting as "covered service providers" must disclose:

• Their status (fiduciary or non-fiduciary)
• All direct compensation from the plan
• All indirect compensation from third parties
• Compensation for plan termination

Is Your Advisor a Fiduciary?

This is one of the most important questions a plan sponsor can ask. An advisor who serves as a fiduciary is legally required to act in the plan's best interest. A non-fiduciary advisor is only required to recommend "suitable" investments — a lower standard.

Ask your advisor to confirm in writing whether they are serving as an ERISA 3(21) or 3(38) fiduciary — and get that confirmation in your fiduciary file.