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Friday, September 12, 2014

Friday 401k Fix: Dump Your Actively Managed Funds

How much do you really care about giving your employees the BEST shot for a secure retirement?  How expensive2much do you really care about your fiduciary duty under the law?  These are really the same question.  Legally, you don't have a choice but to care.

 Each week, we read dozens of 401k-related articles.  There is clearly a rising tide of experts evaluating the industry in a way that truly reflects reality.  They acknowledge all the shortcomings in the 401k industry.  They rightly suggest investing in index funds.  But then there is never a real solution.  Even in these similar-themed articles, with which we agree, we find an inconclusiveness that irks us—possibly the most irritating one is this one:

“Still, Actively-Managed Funds have their place in 401k plans.”

Why?  There is literally NOTHING to back this up.  Are some of these funds outperforming their index?  Occasionally.  But they don’t remain winners in the long term, there is no longevity to their outperformance and there is no way to pick which ones will outperform in the future!  You might think you’re paying some big shot from Merrill Lynch to do that for you, but multiple studies have proven that any “winners” an advisor picks are almost entirely the result of luck and not skill.

So we declare (again), it’s time to DUMP actively managed funds in your 401k plan!  They cost much more and, over time, they leave your employees with less.  If you take your fiduciary responsibility seriously (not just in a way to defend yourself in court), you have to care about the success of your participants.  They have to choose from the investments you offer in your plan.  It doesn't help to stack the odds against them.

Don’t believe us?  Start reading the evidence for yourself.  It’s all there.  As a plan sponsor, you have all the power to change your 401k plan so it truly helps the people it SHOULD help: your employees.

ACTIVELY MANAGED FUNDS ARE NOT THE ANSWER AND THEY NO LONGER HAVE A PLACE IN A SUCCESSFUL 401K.  CLICK THE BUTTON BELOW TO LEARN WHAT IS!

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Posted by at 10:00 AM