Most individual company 401(k) retirement plan participants don’t have the time, temperament, or expertise to make investment management decisions in their company 401(k) retirement plan account.
More and more individual investors are seeking out independent investment advisors. They realize that they need help navigating their company 401(k) retirement plan menu. Here are the three most important elements of company 401(k) retirement plan investment advice.
The first element is a fiduciary level of independent investment advice. No individual investment products are sold. Instead individual company 401(k) retirement plan participants receive investment advice specific to their investment goals and tolerance for stock and bond market risk.
Company 401(k) retirement plan menus are a limited universe. Independent third-party investment advice can help individual company 401(k) retirement plan participants make sense out of their limited investment options.
The second element is the full disclosure of annual mutual fund fees and expenses. These costs are then compared to the annual investment performance of the same mutual funds.
Too many individual investors own the wrong company 401(k) retirement plan mutual fund options. There is a huge gap between how much a company 401(k) retirement plan mutual fund costs compared to its investment performance. Independent investment advice closes the gap.
Expense and performance disclosure allows individual company 401(k) retirement plan participants to own the best available mutual funds at the lowest annual expenses. This is the proven investment management strategy to preserve and grow a company 401(k) retirement plan account.
The third element is the annual cost of the investment advice. That cost is determined by the calculation of the annual investment advisory fees.
Company 401(k) advisory fees are a fixed percentage rate (usually around 1% annually). The fees are calculated on the value of the company 401(k) retirement plan account at the end of the calendar quarter.
Independent investment advisors sit on the same side of the table as individual company 401(k) retirement plan participants. In a rising stock market, the lowest cost and best-performing company 401(k) retirement plan mutual funds are owned.
In a declining stock market, the investment advisor provides a game plan to preserve company 401(k) retirement plan account principal. Stock and bond market exposure is reduced as current economic and market changes dictate.
Lower costs, improved investment performance, and a principal preservation game plan are the key elements of individual company 401(k) retirement plan participant advice. These elements added together are worth much more than the cost of a 1% annual advisory fee to a company 401(k) retirement plan participant.
Ric Lager
Lager & Company, Inc.
