Sticking with the status quo 401k advisor is easy.
You may say it’s the devil I know. Unless you are 401(k) provider or ERISA attorney you may not be the best judge of 401(k) devils. You shouldn’t be. You should be the best judge in your core business. Here’s some reasons you may be sticking with a devil of a 401k advisor and the reason to change.
The 401k advisor is our client or brother-in-law.
If your advisor is our brother-in-law how can we change? Aren’t advisors all the same anyway? Let the brother in law get paid for helping the employees could be one answer. There are several functions that an advisor can get paid to do. Let the brother-in-law do the one that their skill set is best lined up to do.
We have a big well-known platform provider (record-keeper/investment firm) that is handling it?
You may have picked a firm because of their reputation for good investments or because they bundle their investments with administration. What happens if the investment today turn sour tomorrow? Will they fire their own portfolio managers and hire new ones? Will they voluntarily switch you to another providers while they get their act together? Might they change the way they evaluate themselves so that they will look good in your eyes and stick to their status quo?
Having the budget to advertise on expensive media means you have the money and have decided it is in the shareholder’s best interest to do so. It does not mean that your investments, 401(k) administration, 401(k) advice and plan design are the best.
The 401k advisor is handling it?
What are they handling specifically? Some employers I have talked to seem to believe that it includes services which were never specified. Be sure to understand the services provided by the investment advisor. The law is not so kind (Google 401k lawsuits). Does your advisor have a menu of services or a specific contract that makes them a fiduciary, like you? If so, has your ERISA attorney reviewed it?
Nobody’s complaining about the 401k advisor.
Bernie Madoff didn’t have complaints from his investors either. Now there are many voices saying someone should have done more due diligence. Just like you, your employees hare busy working and living their lives. They may be afraid of complaining for fear of losing their jobs. Former employees that continue to participate in your plan have nothing to lose. However, their complaints are likely to be directed at attorneys and the Department of Labor’s investigators.
The 401(k) is good enough.
Is that a feeling or a quantified measure? In manufacturing we have plus or minus tolerances to tell us when it is enough. Does good enough mean that 90% of our employees are on track to retire or that 90% of our investments pass our investment policy statement benchmarks.
I picked it, so it must be good. What is the measure of good? The 401(k) is curious in that the employees and Department of Labor are interested in providing adequate retirement income. The company may be interested in perceived employee benefit accomplished with as little out of pocket costs and ongoing time. This often leads to a decision that starts in the CFO’s office that gets moved into HR for any ongoing administration. The reputation then gets based on the latter rather than the best plan to get employees on track to retire. The investment selection process should not be about reputation, but by independent facts. Oh well, my bad or I’m sorry for your investment loss
We’ve sunk money in it.
In this case, the majority of the money is not the company’s- it’s your employees. It is your duty as a responsible plan fiduciary to monitor and replace bad investments and service providers.
Does your 401k advisor know more about the 401k than you do?
If not, it is time to get a second opinion.
(1) The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. (2) Securities and Advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC. (3) The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with residents of the following states: AZ, IN, IL, MI
