Keep What You Already Have: Adding 401(k) Retirement Plan Account Management To Your Practice

By Ric Lager

The vast majority of individual company 401(k) retirement plan participants take a passive approach to their accounts. In hindsight, the “set-and-forget” investment management strategy has worked very well since the current stock market cycle bottomed out in March 2009.

Many participants seem to be very satisfied with average stock market investment returns. That fact, combined with company-matching and personal contributions, made 2017 a record year for individual retirement plan balances.

Those record balances are exactly the reason you should give strong consideration to carving out an individual company 401(k) investment advice niche in your practice in 2018.

The first rule of investment management is to keep what you already have. Your clients don’t want their current company 401(k) retirement plan balances to fully participate in the next great stock market decline. The same can be said of the current rising interest rate environment.

All company 401(k) default mutual fund menus are full of closet indexers. These mutual funds struggle mightily to keep up with the annual returns of the S&P 500. You clients can investment their company 401(k) retirement plan dollars successfully in these mutual funds during rising stock markets.

Expensive and under-performing mutual funds fall the farthest and the fastest when stock and bond markets turn negative. Your best clients need an annual expense and investment performance analysis of their existing company 401(k) retirement plan mutual funds. They also are in dire need of a stock and bond market risk management strategy.

The last few years of stock and bond market investment gains are “old news.” The next most important company 401(k) retirement plan account investment management decision is will be to protect the last several years of stock and bond market investment gains.

As an investment advisor not affiliated with the company 401(k) retirement plan sponsor or provider, you are uniquely positioned to offer third-party, independent analysis of annual costs and investment performance for your best clients.

The best stock market risk management strategy in an individual company 401(k) retirement plan account now is to own a handful of mutual funds that significantly beat their asset class or peer group benchmarks. These mutual funds are well worth the annual fees that your clients pay the mutual fund company.

There is no way on earth that your best clients have identified the best mutual fund options available on their default company 401(k) retirement plan menu. That is exactly why they need your investment advice before the stock and bond markets take a turn for the worse.

Ric Lager is founder and president of Lager & Co., a registered investment advisory firm based in Golden Valley, Minn. He was the co-creator of the “No More Pies” investment series for financial advisors and author of Forget the Pie: Recipe for a Healthier 401(k). Ric may be contacted at [email protected].

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