More and more of the Minnesota company retirement plan participants I meet with tell me that they are currently receiving investment advice on their company retirement plan account from their existing investment advisor.
I think that is great news. Any existing investment advice relationship is a good thing for an individual company retirement plan participant.
I always ask two questions to any individual company retirement plan participant who gives me the “other advisor” explanation. The first question I ask is, “What is your current investment advisory doing for you right now to preserve the principal in your company 401(k) retirement plan account?”
The great stock market decline of late 2008 to early 2009 lost this generation of company retirement plan participants a great deal of money. Almost four years later, we might very well be in the middle of another great stock market crash right now.
If you are hearing the same investment management message now, as you did then, you should be very concerned.
“Hang it there, the stock market always comes back,” is not an investment management strategy. This investment advice falls into the same category as the buy-and-hold concept promoted by both company retirement plan providers and company retirement plan mutual funds.
This investment advice did not work out four years ago. It will not work out during this current stock market correction either. Stock market history repeats itself every few years regardless of the memory of your current financial advisor.
The second question I ask is, “How do you compensate your current advisor for the advice he or she provides you on your company retirement plan account?”
The response I usually get to this question is that the current investment advisor is not being paid by the company retirement plan participant. The investment advice being provided is “part of what he/she is helping me with.”
Investment advisors either work for large companies or they run their own businesses. In either case, they can’t spend a great deal of time working for free. No investment advisor works for a non-profit company.
If you are not directly compensating your current investment advisor for detailed, specific and customized investment advice on your individual company retirement plan account, you have to really wonder about the timeliness and quality of that advice.
How much time can you spend in your job doing work that you don’t get paid for?
Make sure that your current investment advisor has a strong financial incentive to advise you to preserve the principal in your individual company retirement plan account in the early stages of a potential stock market decline.
Ric Lager
Lager & Company, Inc.
