Last week, Yahoo! Finance featured an article about company 401(k) brokerage accounts.
My daily news feeds find very few articles on self-directed company 401(k) retirement plan accounts. The scarcity of information on these accounts has much to do with their multiple names like SDBA’s (self-directed brokerage accounts), “brokerage window accounts,” or “401(k) brokerage option.”
When a company 401(k) brokerage article is published, it predictably follows the same thinking. Sadly, this article also provided more negatives than positives about company 401(k) brokerage accounts.
As an investment advisor who works with client’s 401(k) brokerage accounts every day, I take strong issue with several of the points made in this article.
The majority of individual company 401(k) retirement plan participants don’t have the experience, sophistication, or the time commitment necessary to manage their retirement assets. The last thing that my individual company 401(k) investment advice clients want for the largest part of their retirement assets is to play “do-it-yourself.”
My current clients can certainly be described as “educated.” But not all of my clients are lawyers, doctors, or consultants. All of my individual company 401(k) advice clients are concerned about the preservation and growth of their retirement money at the lowest possible costs.
“The brokerage option is on the other end of the spectrum from another option that has become more common in recent years, the target-date funds for hands off investors.”
Default company 401(k) retirement plan menus are full of target date mutual funds with high costs, single-family mutual fund restrictions, and poor investment performance. My company 401(k) retirement plan brokerage accounts clients are happy to stay on the other end of that spectrum.
“But experts warn that too much tinkering is hazardous to your financial health.”
That quote must be from the same experts that manage mutual funds with exorbitant annual management fees and poor annual investment performance. Google the Morningstar numbers for the percentage of mutual funds that beat their benchmark performance index in 2016.
I have reviewed default company 401(k) retirement plan mutual fund costs versus company 401(k) brokerage account costs for the last 17 years. Company 401(k) brokerage account costs are almost always lower and the investment options offer better-performing investments.
“If you really hate somebody, give them a brokerage account and tell them to Google ’investment ideas.”
Nathan Fisher of Fisher Investments sells a product named 401(k) Calculator. Mr. Fisher is hardly an independent expert of the subject of company 401(k) brokerage accounts. His company sells an online company 401(k) advice product.
Annual company 401(k) brokerage account costs should always be a concern for individual investors. The same goes with professional investment management fees.
The mainstream investment advice media is clearly incapable of a balanced and fair analysis of company 401(k) brokerage accounts.
Mutual fund companies are among the largest print and online media advertisers on web sites like Yahoo! Finance? What online media company is going to print an article that upsets one of their largest advertisers?
Mutual fund companies, and their latest target date mutual fund invention, want to retain a strangle hold on company 401(k) retirement plan assets. Articles like this one at Yahoo! Finance help them do just that.
We need more stories about how individual company 401(k) retirement plan participants can work with independent, third-party investment advisors to lower costs, preserve principal, and improve long-term investment performance using company 401(k) retirement plan brokerage accounts.
Ric Lager
Lager & Company, Inc.
