5 Things your 401(k) Advisor Doesn't want you to know

1. What you and your employees are paying in fees

Employers and employees are typically aware of the fund expenses – also known as expense ratios – in their 

plan, but are often blind to the other fees that are also tacked on.  All in all, employees in small and mid-size company plans are often subjected to paying two to four percent in fees annually on their 401(k) account balances.  There’s no need for this to exceed one percent for everything.  By staying below the one percent threshold, employees can accumulate tens if not hundreds of thousands of  dollars more in savings over a thirty year career.

What are the other fees? Beyond fund expenses, employees in a plan often pay for record keeping, asset management, and commissions passed back to the plan provider or sales person. Some of these fees are fair – as long as they don’t bring the total amount of employee fees to over one percent. Avoid any fund with a commission or any strings attached.

2. Actively managed mutual funds rarely beat the market and aren’t worth paying a premium for

Most 401(k) plans are built with actively managed mutual funds with a goal to beat a 

benchmark market index (e.g. the S&P 500).   Beating the market sounds like a worthy goal but unfortunately, few fund managers can demonstrate results of doing this consistently over any stretch of time (if ever).  Picking stocks is like predicting the weather – very hard to do with any real consistency.  Managers not only have to be very good, but they also have to find enough winners to overcome the costs of losers, research, personnel, and added trading costs are common with actively managed funds to outperform an index.

One independent study recently evaluated the performance of 2,100 actively managed funds over a 31 year period and found that only 0.6% of fund managers had stock picking success.  How different is that from zero?

Demand index funds in your 401(k) plan.  You’ll likely be much better off.

3. They share none of the risk or fiduciary duty on your plan (but you sure do)

When you provide 401(k) benefits, you have the duty to run the plan in the best interest of your employees.  Part of those duties includes

monitoring investment options made available and making changes as appropriate, providing guidance materials to members of the plan, etc.  While your rep and provider may have given you a list of funds to select from – and even suggested a few – it’s your responsibility.   The investment expertise the rep is supposed to provide is actually fully on the employer.  Bad funds? Your problem.  Employee complaints? Your problem.  Employee lawsuit? You get the picture.

So how can you solve this?  Choose a provider that will serve as an ERISA 3(38) advisor on your plan.  These providers share some important fiduciary duties on your plan.  Not only will they take on the burden of managing the fund line-up, but they will also be on the hook for any investment line-up issues that may arise.  This extra service shouldn’t cost anything more either.

4. You don’t need a contract to get better service and lower pricing

Many providers of small and mid-size plans offer a contract or require a termination agreement to service your plan.  What they don’t tell you 

is that it does not commit them to providing you better service or even pricing for that matter. There are many providers that offer great service and better pricing without any kind of contract.  Choose one of these to avoid the rigmarole.  If you find the provider, investments, or services are not what you need them to be, you don’t want to be locked in to a bad plan.

5. Employee 401(k) benefit meetings add little value

 Employees prefer confidential, more personal approaches to discuss their needs. If you have a plan, have you ever 

had your advisor hold an employee meeting at rollout and periodically thereafter?  How many questions did your employees ask other than how to login?  The most common response is zero. People don’t like to discuss their finances or financial knowledge in front of others.  Money holds too many social stigmas in our society.  It’s not a bad idea to have a kick-off meeting or web conference for educational reasons, just don’t expect any kind of deep discussion

Still, your employees will have questions.  With this in mind, ensure your employees understand how to call or meet with an advisor when they need general guidance. Also, make sure they have access to good online education materials.  We all have different preferences for learning about finances, so offering a range of options is a great way to tackle this need.

Authored by: Stuart Robertson

YOU work hard to attract and retain talented employees but your 401(k) plan could also say a lot about how much you value them.

The Plan Sponsor

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The Ultimate 401(k) Toolkit will help you better understand and manage your own plan so that you can make the best decisions to grow your company.

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Interactive 401(k) Fee Calculator

Uncovering and understanding plan fees has always been one of the more strenuous parts of plan management, until now. This easy to use calculator that will allow you to boil down all the fees of your plan to the only number that matters, the bottom line.

12 Point 401(k) Plan Compliance Checklist

An annual review of how you are operating your retirement plan can prove beneficial in avoiding the 12 most common retirement plan mistakes, found by a Department of Labor audit.

2021 401(k) Compliance Calendar

A calendar of all the relevant dates and deadlines you need to be aware of as a decision maker for your company's retirement plan. 

5 Common 401(k) Mistakes Made By Employers

Mistakes in administering a 401(k) plan can cause headaches at best, but can result in fines and penalties if these problems are not rectified and ever catch up to you in an audit. Here are 5 common mistakes we see employers make and how to avoid them.

5 Common 401(k) Mistakes Made By Employees

If you are currently saving for retirement in a 401k, you already have taken a step in the right direction. While you may rest at ease thinking you are one of the fortunate ones able to save for retirement, it is important to realize that just participating may not be enough. Here are common mistakes we see employees make and how to help your employees avoid them.

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Independent Plan Benchmark Report (offer expires June 12, 2021)

Benchmarking is an important part of managing your company's 401(k). Our process is designed to help you check the pulse of your plan and allow you to make the best decisions for your company. For a limited time, we are offering a free benchmark report to help you quickly understand how your plan stacks up in the market place. (offer expires June 12th)

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Is your current advisor costing you your retirement?

7/10 Companies Fail a Department of Labor (DOL) Audit.

8/10 Participants Are Not On Track To Retire.

A recent report noted that 44% of employers did not read their 401(k) fee disclosures in the past year.

34% of business owners said they are not at all familiar with their fees.

The average 401(k) plan is paying 3.1% in fees.

Tony Robins

Hidden 401(k) fees and various backdoor payments are costing Americans billions of dollars a year and can reduce an investor’s overall retirement savings by as much as 40 percent to 60 percent.

Beth Garner

There are many benefits of offering a 401(k) plan. Studies have shown that companies that offer plans typically see higher levels of loyalty and productivity and lower levels of stress among employees. In addition, contributions provide tax deductions for the employer. Smaller companies can see additional tax credits in the first three years when offering a 401(k) plan.

To attract and retain the best talent, today’s employers must offer a comprehensive benefits package that includes a robust retirement plan that helps businesses prosper as well as individuals save for their future.

In addition, we will also invite you to our future webinars and presentations on the following:

Plan Success

How to measure the real success of your retirement plan as it relates to your company goals and your employees.

Service Providers

How to ensure the service providers you select are the best fit for your company.

Fiduciary Best Practices

Keep your company retirement plan up-to-date, compliant and running well with these best practices for making the most out of your business 401(k) plan.

Tax Strategy

One of the easiest ways to lower your taxable income is to contribute to an employer sponsored retirement plan.

Plan Design

As a business owner, you want to understand your retirement plan design options and how that fits into the big picture of growing your business; making poor choices can be severe.


If you want to know how fees affect your retirement savings, you need to know about the different types of expenses and the different ways in which they are charged.

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The Plan Sponsor

401(k) Toolkit

The top 5 tools every 401(k) Plan Sponsor needs in their back pocket to confidently manage their retirement plan.
Plus, for a limited time, we will also send you a benchmark report so can see how your plan stacks up in the market place.
Offer expires June 12th, 2021