Our experience in assisting entrepreneurs and established businesses encompasses a full scope of financial services, from strategic planning to financial modeling. To learn more about our services for business owners call us at 423.756.4800.
A Better 401(k) Plan
401(k) plans can be an excellent way to tuck away extra savings as an owner and offer retirement benefits to employees, but a downside to this excellent employee benefit is that hidden costs and high fees too often eat away at owner and employee savings.
Add in the provisions of the Pension Protection Act of 2006 that call for increased fiduciary liability of plan sponsors, and the lack of fee transparency in the 401(k) and 403(b) marketplace creates a real and legitimate liability for plan sponsors that don’t know how and where investment fees are being directed. More transparency is required.
Studies show that roughly 89% of US equity mutual funds in 401k plans were not “indexed” to the broad market. This means that these investments are actively managed (ie stock picking, etc.) by an investment manager completely and hopelessly stuck out of touch with the company plan. Over the long term, the majority of active managers underperform the broad market (index funds). While there are good investment managers out there, selecting a bad manager is unfortunately an easy thing to do.
All of this is to say that while 401k plans may appear similar to one another, there are a number of factors to consider in the construction and administration of a plan. Working with an advisor that affords you flexibility and transparency can give you the confidence to focus your energy where you want: on running your business.
For more information on setting up a 401(k) or 403(b), call us at 423.756.4800.