“Both Employers and Employees need to wake up”

By Mark Folgmann

Most of us get only one shot at retirement so therefore we really need to pay attention. I am continuously amazed at how much trust and faith employers place with their financial salesperson. I talk to companies each and every week that are blindly following recommendations by someone who gets compensated to sell them products. Wake up employers; these “advisors” whom want you to believe they are on your side are really in the business of marketing products – not creating wealth for you and your employees. As stated in previous articles; it is not ok to be down 50 -60% in your retirement accounts and if you are, look for a second opinion from someone who is not paid to sell products. The criteria for selecting a retirement plan provider should not be the place where we have our checking account or where we buy our life insurance. It should be someone who specializes and understands the unique problems that surround the issue of assuring my employees will be able to retire and their families will be financially secure. This is the definition of a financial fiduciary.

Employees it’s your money and retirement; you can’t bury your head in the sand and hope the problem will go away, it won’t. At some point your 401k will turn into your monthly check for the rest of your life and if that monthly check is reduced by 40% because you did not pay attention to fees it will be a very sad period for your family. Your life is not too busy to take a couple hours educating yourself about your own retirement. Dalbar conducted a survey over a 20 years timeframe where they determined the S/P 500 return was in excess of 11% but the average investors return was only 4.28%. How could this happen? I’ll tell you how, the financial service industry took 30- 50% of the return in fees and the investor made investment mistakes managing his portfolio which cost him the rest. This is why it’s important that we build low cost 401ks (less than 1% in annual fees) and make available model portfolios for employees to choose instead of individual mutual funds.

Employees managing their own 401k are equal to asking you to land a 747 in mid flight, it really does take training. My firm is in the process of helping a local company rebuild their 401k and so far 100% of the employees have selected model portfolios over individual funds. This gives them great relief because they don’t feel comfortable managing their own investments and realize they have not been trained to do so. Our next article will be our 12th and last article on 401ks. Next time we will provide you resources to educate yourself so you can take charge of your family’s retirement.