Last week, I was referred by a long time individual 401(k) investment advice client. He is an attorney, and referred me to a younger attorney in the same department at his law firm.
As I always do, I did a social media search on the young attorney. Decent undergrad college, good law school, just made partner three years ago. Wife is an internist, two kids, live in one of the very nice local suburbs.
I sent the young attorney an e-mail. I stated the reason for my contact was that I was referred to him by my client. We set up a phone conversation a couple of days later.
On that phone call, the conversation took a very similar path. I found out that the young attorney, “Has a guy who takes care of his investments. He is a nice guy”
I stated that I was not surprised. And that I did not mean to disrupt any existing relationships. I then asked if the investment management relationship with “his guy” include his law firm 401(k) account.
It did not. So, I asked a couple of low-level questions about how his 401(k) was doing over the last couple of years.
The young attorney did not know.
I have several attorneys as 401(k) advice clients at this law firm. So, I have an in-depth knowledge of the default mutual fund options on this law firm 401(k) menu. I asked the young attorney if he could remember the names of a couple of mutual funds he currently owned in his 401(k).
He could not remember one name.
This same story takes places multiple times a month in my prospecting efforts. Strong referral or glacier ice cold telephone call, this same pattern repeats itself.
Most individual company 401(k) participants have no idea how much they pay in annual company 401(k) mutual fund fees. And they sure as heck don’t know much about their investment returns if they can’t remember the name of the mutual funds they own.
U.S interest rates are rising. Several key measurements indicate that U.S. stocks are as much or more overvalued than at any time in U.S. stock market history.
Now is not the time to continue your inattention to your 401(k) account. Know how much your mutual funds cost you each year. And for heavens sake have a rough idea if those same mutual funds are providing enough annual investment performance to justify the annual cost.
One last thing. If I call you, don’t tell me “your guy” is providing asset allocation, stock and bond market risk management, and investment advice on your 401(k) account.
He does not know what mutual funds you own in your 401(k) either.
Ric Lager
Lager & Company, Inc.
