Most Common 401(k) Fund Lineup Mistakes

The most obvious mistake – this is not your field of expertise! The mistake: Not hiring a registered investment advisor fiduciary (RIA), that is a retirement plan specialist, that takes full responsibility for selecting the funds including avoiding all the mistakes I am about to list. Sometimes Brokers (registered reps) and RIAs can make these mistakes – we seem them on plans we’re analyzing regularly. When the funds are selected by the RIA with discretion, it’s described under ERISA section 3(38). Delegating to an expert is a very smart fiduciary move! Not providing the lowest cost share class possible. Related: When the lower cost share class is not able to be accessed, not documenting why. Providing individual funds that are high volatility. They should be provided only inside of a “do it for me” option that is overseen by an RIA. Not providing enough passive low cost funds to construct a diversified portfolio. Too many funds. You want diversification. If a participant allocates across funds that overlap, they achieve concentration, the opposite of diversification. Much of the angst in 2000-2009, the “Lost Decade”, was due to investors placing their assets in overlapping large US cap funds which follow the S&P500 which was down over the ten year period of the “Lost Decade”. Removing actively managed funds from the lineup based solely on recent poor performance or adding actively managed funds to the lineup based solely on recent excellent performance. This points out the fundamental problem that active funds pose for plan fiduciaries. Their selection is very difficult to justify. Quite often when an active manager performs poorly relative to others, their performance turns...

What Plan Sponsors Learned at our Oct 17 2017 Workshop

Couldn’t make our 401(k) Workshop on October 17? No problem – here’s an executive summary for you. We are willing to bring the case studies to your site including the CPA and SHRM CEUs. Just let us know! Remember when “paradigm” was very popular in our business vocabulary? Well, we’re bringing it back! New paradigm: Leading Registered Investment Advisory (RIA) firm O’Reilly Wealth Advisors (OWA) is bringing large 401(k) retirement plan expertise to the small 401(k) plan market.  401(k) plans of total assets of $2M to $20M were studied. Compared to a competitive fee structure OWA RIA-led plan, unfortunately current big box provider plan costs are high and fee growth rate significantly higher. However, the typical big box providers (insurance and brokerage companies), and the brokers or registered representatives, some of whom may accept commissions from the big box providers, in our opinion, have failed to drive costs lower. Overall, the big box providers are many years behind the curve. Why rush? Business is profitable and plan sponsors have a lot of fires to fight everyday. We all know that we have a retirement crisis in the USA. People are not saving enough, early enough, to support a comfortable retirement. Millions of Americans working in small to medium size companies are experiencing lower growth in their 401(k) accounts than is necessary. It’s time the problem is fixed. It’s the not sole cause of the retirement crisis – but it is easily fixed, and will contribute toward improving this nationwide serious problem. Just as important as current cost in a 401(k) plan is the rate at which the plan costs grow as the...

Your Q3 2017 Report is Here

We’re having a great year. Of course, that will change and the markets will inevitably go down. Our models are up about 6 to 13% for the year.  The world outside USA is strong at 21%. This asset class is overdue – it’s been depressed for quite some time. For the quarter, our models were up from about 2% to 5%. The rest of the world and small stocks were the winning asset classes at 6.2% and 5.7% for the quarter.  Specifically under the heading of rest of the world, Emerging Markets was up around 8%. See our Model summary and trends here. See our detailed Q3 Global Report here. Call us with...

Post Equifax Data Breach Ideas

We are not claiming to be experts. We think you will find this a handy starting point. Clients: Most of you have all or some of your accounts held at the TD Ameritrade institutional custodian. Know that we get immediate around the clock notifications of money and securities moving in or out of your accounts. We are notified of new accounts, transfers and closed accounts. If you think that your data has been compromised and are concerned, you can call TD or us and ask for your accounts to be placed in “Loss Prevention”. That means that TD will flag your accounts into a heightened mode of scrutiny. This will also add an inconvenient layer of extra bureaucracy when you want to legitimately access your account. Are you suspicious that you data has been compromised and your identity has been stolen? Then you should call the credit bureaus and ask that they “freeze your credit”. This will prevent the person(s) who potentially stole your identity to purchase big ticket items in your name. Here the bureau numbers for your convenience. Equifax (CBI) (800) 685-1111 Experian (TRW) (888) 397-3742 Trans-Union (800) 916-8800 Paid Protection Services: What about paid protection services like LifeLock? We think these services are worthwhile. It’s best to protect yourself with preventative measures and then LifeLock will help if someone takes advantage despite your good practices. Importance of Passwords: There seems to be no shortage of hackers these days. It’s very important that every password is “strong” and is changed at some regular frequency. It’s easy to get lazy. I recommend that you calendar your password changes so...

401(k) Workshop Oct. 17 – Open for Flyer

We’re very excited to bring a very high quality 401(k) workshop to North County. Click here for the flyer. A 401(k) plan where a plan sponsor hires a registered investment advisor with specialized 401(k) knowledge is completely different than the typical 401(k) with a broker. Registered investment advisors have loyalty only to the plan and the plan sponsor. They do not accept commissions. Brokers have conflicts of interest  (commissions) with the record-keeper and/or mutual fund company. This makes it impossible for brokers to take on any fiduciary liability. It makes it impractical for them to lead efforts for more transparency and lower fees. Their investment knowledge is often misguided. Please RSVP to roadmap@oreillywa.com or call 760-504-6040. See you at Vista Chamber on Tuesday, Oct. 17, 11:30 for lunch & networking and session starts at 12:00 to 1:30...

Portfolio Performance, Market Behavior as of 6/30/2017 Posted Here

The quarter just ended one business day ago and already we have posted our 6/30/2017 Model Portfolio performance data found here. The quarterly market review is posted here. It quickly informs you what happened in last quarter and first 6 months of year as well as longer term. The last two pages of the quarterly market review reports on the relationship of stock market performance and interest rates. Most assume that the relationship is clear- guess again. In a week or two we’ll have our 401(k) numbers and will add them here. What happened in the last quarter and first 6 months in our portfolios. Well, steady goes the ship – boringly good.  The 100% stock portfolio is up about 8% for the year and just under 3% for quarter. Volatility is low. Some industry pundits are saying, “This is scary that it is not scary”. Their worry is that something will upset the apple cart and the market will get more volatile. My reaction, “”Of course, that will happen – it is NORMAL! And there’s nothing you can do about it – except try not to watch the market that closely!” Ok, ok, I will get off my soapbox! So what’s been happening with various asset classes in recent times? The “rest of the world” stock index that we show as a benchmark in our model data has been on a tear compared to its performance over the last 18 1/2 years. It was up 14.1% last six months and 5.8% last quarter. To enjoy that you have to own it which our clients do in the DFIEX...