The do-it-yourself approach to managing a company 401(k) account is under pressure. And intense scrutiny. Due to the volatile stock markets and rising interest rates.
Seeking independent professional 401(k) investment advice has a cost. That cost is the first casualty in the consideration of this option.
“Why should I pay someone for 401(k) advice?”
Good question. Let’s think the question over more than most individual 401(k) investors ever do.
Investment advisory fees compensate advisors for their years of education, experience, and expertise.
You already pay your 401(k) mutual fund manager. Even though you never get the bill. The mutual fund subtracts their annual fees and expenses. Before they report their investment returns.
“How can I determine the real value of 401(k) advice?”
It can still be a challenge for a 401(k) investor to determine the real value of investment advice.
The best investment advisors will give straightforward answers. And articulate exactly the value of their 401(k) advice service.
Investment management expertise has a cost. And that cost has to be worth more than the annual advisory fees paid by the investor.
I am not affiliated with a broker-dealer. I am a fee-only registered investment advisor. My individual 401(k) advice clients compensate me based on their 401(k) account value.
The fee payment arrangement is the AUM (assets under management) model. The 401(k) advisory fee is a percentage of the 401(k) account total assets. The advisory fee is calculated and charged on a quarterly basis.
401(k) advice fees can vary. My most common 401(k) advice fee percentage is 1.00% of the total 401(k) account value. A 1% 401(k) AUM fee means that a client will pay an annual fee of $10,000. To collaborate with an advisor on an investment portfolio of $1 million.
A 401(k) investment advisor must disclose their AUM fee structure in a Form ADV Part 2A. This required document is delivered to the 401(k) investor at the beginning of the relationship.
The AUM compensation model is best aligned with the 401(k) advice client. As the investment advisor, I am on the same side of the table as the individual 401(k) investor.
Motivated to grow 401(k) assets in favorable stock markets. Even more motivated to preserve 401(k) assets in falling stock markets. No commission-based ethical conflicts of interest. A true level of fiduciary investment advice.
Need Help With Your Investing Strategy?
Are you looking for a complete overhaul of your 401(k)? Need a second opinion from an independent, fiduciary investment advisor? Whatever your 401(k) needs are, I am here to help.
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