What’s Your 401K Game Plan? Four Questions Every Plan Sponsor Should Be Asking
It seems that virtually everybody agrees that during the last few weeks, the investment markets have been ruled more by emotions than logic. But as we watch the markets rise and fall like giant ocean swells, it's fair to ask: how, exactly, does this happen?
With the passage of the new ERISA amendment, the time is ripe for a 401K plan touch-base to determine what kind of ROI your plan—and your plan broker—are delivering. Ask these questions and then think about hiring a neutral third party, called a Fiduciary Investment Manager, to provide better service at a lower cost.
What is your legal liability under the plan? Under a typical broker arrangement (or those of a colorful array of other titles including financial consultant, retirement plan specialist, etc.), your company shoulders the liability. With a Fiduciary Investment Manager, companies benefit from the expertise of an independent, registered investment advisor who not only manages the program but accepts fiduciary responsibility in writing.
What fees are you paying? If the answer is "I'm not sure," find out. DOL 408(b) rules now require investment companies to clearly disclose all compensation received from employers and employee participants. Compare your fees against the fee-for-service model of a Fiduciary Investment Manager which eliminates commissions, hidden fees, and other practices that result in higher costs and lower returns.
What's the average return of your plan? The average 401K plan isn't keeping up with inflation, according to market research firm Dalbar, who found an annual return of 1.9% compared to an S&P 500 return of 8.35% (Source: Dalbar QAIB, 2008). A Fiduciary Advisor has an unlimited choice of investments that allow for a best-in-class lineup of funds and the ability to make changes under constantly changing market conditions.
What kind of personalized advice are your employees getting? By law, brokers aren't allowed to give advice. A Fiduciary Investment Manager works for the employee, providing a never-before-offered level of customized service designed to maximize individual retirement savings.