401(k) Advisor Fees: What is average and what is high?
A practical guide to how 401(k) advisors charge, what fee levels are common, and why certain services (like 3(38) investment management) often cost more.
401(k) advisor fees are one of the most important (and most misunderstood) costs in a retirement plan. For plan sponsors and HR teams, the goal isn’t necessarily to find the lowest fee—it’s to understand what you’re paying for, how the fee is calculated, and whether the services and fiduciary support match the price.
Below is a practical guide to how 401(k) advisors charge, what fee levels are common, and why certain services (like 3(38) investment management) often cost more.
How 401(k) advisor fees are typically charged
Most 401(k) advisors are paid using one (or a combination) of these methods:
Asset-based fee (a percentage of plan assets, often quoted in basis points)
Flat annual fee (a set dollar amount per year)
Per-participant fee (a dollar amount per eligible/active participant)
Commission-based compensation (less common today for employer plans)
Basis points (bps) are simply a way to express percentages. For example:
50 bps = 0.50% annually
100 bps = 1.00% annually
So, if a plan has $2,000,000 in assets, a 50 bps advisor fee would be approximately $10,000 per year (0.50% of $2,000,000).
Commission vs. fee-based: why fee-based is the standard today
Historically, some advisors were compensated through commissions tied to investment products. In today’s 401(k) market, fee-based or fee-only arrangements are far more common, largely because plan sponsors want clearer pricing and fewer conflicts of interest.
In a fee-based model, the advisor typically charges an agreed-upon fee (often asset-based) and discloses it clearly. This aligns with the broader fiduciary focus under ERISA and the expectation that plan fees are reasonable for the services provided.
If you’re evaluating an advisor relationship (or replacing one), it helps to understand not just the advisor’s compensation, but also how the plan’s other service providers are paid. For a step-by-step selection framework, see how to hire a retirement plan advisor.
What is a “normal” 401(k) advisor fee? (50 bps is common; 100 bps is high)
While every plan is different, a 50 bps (0.50%) advisor fee is one of the most common benchmarks in the market. Fees around 100 bps (1.00%) are generally considered high-end for many plans—though there can be legitimate reasons for higher fees (more on that below).
What’s “reasonable” depends on:
Plan asset size and participant count
Scope of services (education, committee support, vendor management, plan design help)
Fiduciary role (3(21) vs. 3(38))
Whether the advisor is handling additional projects (RFPs, fee benchmarking, investment policy statement work)
Important trend: advisor fees often decrease as plan assets grow. Larger plans tend to receive breakpoints or tiered pricing because the advisor can deliver the same core services with less incremental work per dollar of assets.
For example, an advisor might quote a tiered schedule like:
0.60% on the first $1M
0.45% on the next $4M
0.30% above $5M
This type of pricing is one reason it’s worth revisiting fees periodically as the plan grows.
Why 3(38) advisors usually charge more
Many sponsors hear “3(21)” and “3(38)” and understandably ask: what’s the difference, and why does it affect fees?
3(21) investment advisor: provides advice and recommendations, but the plan sponsor (or committee) typically makes the final investment decisions.
3(38) investment manager: has discretion to make investment changes on the plan’s behalf and takes on additional fiduciary responsibility for those decisions.
Because a 3(38) advisor is taking on more liability and doing more ongoing fiduciary work, it’s fairly common for 3(38) services to cost more than a comparable 3(21) arrangement. If your plan committee wants to reduce the day-to-day burden of monitoring and implementing investment changes, the added cost may be worthwhile—just be sure it’s documented and understood.
For more support resources related to fiduciary responsibilities and plan oversight, you may also want to review the U.S. Department of Labor’s retirement plan guidance at EBSA’s overview of retirement plan fees and expenses.
Annual minimums (e.g., $3,000/year) and who pays them
For smaller plans, it’s common to see an annual minimum advisor fee, such as $3,000 per year. This is typically used when an asset-based fee would otherwise produce a very small dollar amount.
Example:
Plan assets: $300,000
Advisor fee: 0.50% (50 bps) = $1,500/year
Annual minimum: $3,000/year
In that scenario, the plan would pay $3,000 because the minimum overrides the percentage calculation.
Who pays the minimum? Often, the minimum is billed to the plan sponsor (the company) rather than being deducted from participant accounts—especially when the sponsor wants to keep participant-borne fees lower in the early years of a plan. The right approach depends on your plan document, vendor capabilities, and fiduciary decision-making process.
How to evaluate whether your 401(k) advisor fees are reasonable
ERISA doesn’t require the lowest fees—it requires that fees be reasonable for the services provided and that you follow a prudent process. A practical review usually includes:
Confirm the fiduciary role (3(21) vs. 3(38)) and what’s included.
Review the advisor’s scope of services in writing (committee meetings, investment monitoring, participant education, vendor coordination).
Understand the full fee picture (advisor fee + recordkeeping + investment expenses).
Benchmark periodically (often every 2–3 years) or run an RFP as assets grow.
Document decisions in committee minutes.
Plan sponsors also benefit from understanding related compliance touchpoints, since advisor support often overlaps with them. If you’re reviewing providers and governance, these may help:
What Is An ERISA Bond And How To Buy One? (and a directory of ERISA bond providers)
For regulatory background, the DOL’s main retirement plan page is also a useful reference: Employee Benefits Security Administration (EBSA).
Related resources if you’re changing providers or expanding oversight
If you’re evaluating your current advisor or considering a change, it can help to look at the broader ecosystem of plan professionals:
retirement plan providers (recordkeepers/TPAs)
And if plan growth pushes you into an annual audit requirement, you may also want to explore:
401(k) auditors (or browse all auditors)
Conclusion: focus on value, fiduciary support, and fit
In today’s market, most 401(k) advisor relationships are fee-based, with 50 bps as a common benchmark and 100 bps on the high end for many plans. As assets grow, fees often come down—either through breakpoints or renegotiation. And if you want a 3(38) investment manager, expect to pay more because they’re taking on greater fiduciary responsibility.
If you’re unsure whether your current arrangement is competitive, start by confirming the advisor’s fiduciary role, reviewing the written scope of services, and benchmarking the total cost. If you need help selecting the right partner, revisit how to hire a retirement plan advisor and compare options in our directory of 401(k) financial advisors.