A Complicated System That Puts You Last

Your retirement plan advisor is supposed to be helping you out. They offer to refer you to their network of experts to run your retirement plan: a recordkeeper, an ERISA compliance officer, a third-party administrator, even a payroll company.

But are all those people working for you?

Many retirement plan advisors create complicated rings of dependence where referrals mean kickbacks and revenue sharing for the plan advisor. Rather than putting your interests first, these plan advisors create bloated administrative systems that allow them to get more money out of your company. You end up paying premium fees, but getting average-to-below-average service that doesn't do enough to create wealth for plan participants.

Plan advisors who revenue share create a complicated system with many conflicts of interest. Fisher never accepts commissions or revenue sharing. A diagram to the right shows how your funds are allocated to payroll, fund fees/investment management, third party admin, record keeper, ERISA compliance, and plan advisor, while the plan advisor receives funds from them all.

Many of the most notorious examples involve mutual funds. Rather than relying on performance and low fees to sell their funds, some investment management companies offer kickbacks or commissions to plan advisors. Those plan advisors then stuff client portfolios with low-quality funds. As a result, plan participants lose twice. The funds are likely to underperform and the fees are typically higher than average. The only one who wins is the plan advisor.

Twenty years of an average or below average fund can cost you hundreds of thousands of dollars at retirement. Is that a price you're willing to pay?

As little as a 1% improvement in investment performance, can mean an extra 15+ years of retirement spending.

A chart with a grid that has labels along the X (horizontal) and Y (vertical) axes. The Y axis shows dollar amounts from $0 to $1,200,000 in increments of $200,000. The X axis shows ages from 25 to 90 in 5 year increments. Ages 25-65 are labeled as 'Savings Phase', and ages 66-90 are labeled 'Retirement'. At age 65, the line on the grid is dashed instead of solid. A gray area appears on the chart and is labeled 'Retirement Savings'. It starts at age 25 on the X axis, and ends between the ages of 85 and 90. On the Y axis, it starts at $0 and increases in a curve which peaks between $800,000 and $1,000,000 at age 65 before curving back down to 0 for the remaining years. A second green area which represents the extra 1% improvement is present on the chart behind the original gray area. The green area also starts at age 25 on the X axis; however, as it progresses, it overshadows the gray area. The green area peaks between $1,000,000 and $1,200,000 at age 65, and the downwards curve shows between $400,000 and $600,00 of remaining savings at age 90. There are three tooltips overlaid on the chart at various points on the grid. The first one appears at age 65 on the X axis and between $1,000,000 and $1,200,000 on the Y axis, and reads 'Extra Savings at Age 65: $227,000+'. The second tooltip appears between ages 65 and 70 on the X axis and around the $1,000,000 mark on the Y axis, and reads 'Retirement Savings with 1% Greater Returns'. The last tooltip appears around age 85 on the X axis and $400,000 on the Y axis, and reads 'Extra Spending: 15+ Years'.

Assumes starting salary of $40,000, which grows annually by 3% over 40 years starting at age 25. Withdrawals begin at age 66 and are equal to 45% of the projected salary at retirement. The lower return portfolio growth assumes 5.5% annual return in the working years and 3.5% return in retirement, while the 1% higher return portfolio growth assumes 6.5% and 4.5%, respectively.

You can have a retirement plan advisor who takes a rigorous approach to fund selection and keeps fees low. Fiduciary plan advisors who work for you—not for kickbacks—and put their fees toward growing your wealth. The right plan advisor won't compromise your earning potential to make a quick buck. They'll focus on quality over the long term because they understand how big a difference this approach makes for you when it's time to retire.

You can avoid these conflicts of interest by choosing a 3(38) Investment Manager like Fisher 401(k) Solutions. Contact us today to obtain a complimentary investment and fee analysis.

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