401ks

How can you make your 401k work better for you?

  • 401ks,  Return on Investment

    Plan for Long-Term Success

    Take care of the customer and everything else will take care of itself. This simple principle has led to decades of success at Albert Lee Appliance. Albert Lee III, President of Albert Lee Appliance, joined me on About Money last Friday. He said he tells his staff, “I’m not your boss. The customer is your boss.” Albert’s grandfather, the company’s founder, taught him this from the beginning. “He always said, you need to listen to your customer. They’ll tell you what you’re doing right and what you’re doing wrong,” Albert said. Despite the Great Recession, Albert Lee Appliance has expanded, opening new locations to serve additional customers. How was this possible? Long-term planning.…

  • 401ks,  Current Events

    Pigs at the Trough

    The Department of Labor has published new 401(k) plan rules and regulations requiring full transparency of fees. Though plan sponsors and participants have not previously been sent itemized bills, the Department of Labor lists 17 fees they have been incurring. These fees include marketing, legal services, record keeping, investments and more. Under the new rules, indirect fees must also be disclosed. For example, when a company sends an employee to a conferences run by a 401(k) vendor, the vendor passes this cost off to their clients through fees. With the new transparency, “People will find there were a lot of pigs at the trough,” said Jeff Acheson, a partner at…

  • 401ks,  Return on Investment

    Investors Should Keep Their Expectations High

    As an investor, do not lower your expectations. Some such as Charles Ellis, author of Winning the Loser’s Game, think you should. He found that 80 to 90 percent of money managers underperform the market. His conclusion? Investors should lower their expectations. He’s not alone in his findings on under performance. Burton Malkiel, author of A Random Walk Down Wall Street, found over 80 percent of money managers underperform the market. Robert W. Baird & Co also found that over the last 10 years only 370 out of 4,000 money managers beat the Standard and Poor’s 500 (S&P 500) by an average of one percent. Do these success rates, or lack thereof, scare you?…

  • 401ks,  Return on Investment

    Fiduciary or Not?

    As a business owner, if you offer a retirement plan to your employee’s you are a plan sponsor and therefore a fiduciary. Even if you hire an advisor, the Department of Labor (DOL) considers you a fiduciary. As such, you are held legally responsible for your plans compliance. Why is your role suddenly such a big deal? In 2008, the DOL had just 100 enforcement officers to oversee roughly 485,000 plans. Retirement plans, such as 401(k)s, were rarely audited unless there was a complaint. But after the Great Recession, it became painfully obvious retirement plans were not functioning as they were intended. The DOL has said that 77 percent of…

  • 401ks,  Adams Financial Concepts,  Return on Investment

    Fees

    Do you know what your broker is charging you? The North American Securities Association recently published a survey of 34 big and regional brokerage firms and found their fee disclosures were complicated and ranged from 1 to 45 pages. While the disclosures met the technical requirements of disclosure, they were anything but straight forward. The disclosures were often in documents some people put at the side of their bed to read when they needed something to bore themselves to sleep. Fees are important because they can reduce performance. A 1% increase in fees will reduce a portfolio’s value by 17% over 20 years. A portfolio of $100,000 that grows an…

  • 401ks,  Return on Investment

    Diversification or DeWORSification

    I believe one of the main reasons money managers underperform the market is diversification. Robert Haywood from the University of Denver showed that if you took most money managers’ top ten stock picks, they outperformed the market. But, when you add the other 100 plus stocks , which most money managers have, their results decline significantly. I call this, deworsification. Sometimes, less is more. Evaluating each company and its potential for innovation and growth is extremely important to ensuring successful investments. R.W. Baird did a study in which they examined over 4,000 mutual funds. They found only 370 produced an annual average of at least one percent better than their benchmark over a period…

  • 401ks,  Current Events

    Big Questions

    The Fiduciary Standard says, “A broker or financial advisor must make every decision in the best interest of their client.” Sounds like the right thing to me. Why then are big firms fighting this standard? Registered investment advisors must adhere to this fiduciary standard. But, registered representatives, such as financial advisors and consultants for big brokerage firms, only have to make suitable recommendations on their client’s behalf. If their recommendations aren’t in the best interest of their clients, then in whose best interest are they?   For more information on all of these topics, I encourage you to listen to About Money, a weekly podcast and radio show. You can…

  • 401ks

    Chocolate-Covered Hand Grenades

    What is something worth? It’s worth as much as another man or woman is willing to pay for it. When I talk about investing in “chocolate covered hand grenades,” I’m not literally talking about hand grenades or chocolates. I’m describing what happens when people invest in bubbles. Bubbles in the market are created by supply and demand. As the demand increases and the supply decreases, the cost rises. This is the bubble growing. But, when the demand disappears the bubble bursts and the cost drops suddenly. More than likely, it plummets. Why, when a burst is coming, do people keep investing? Chocolate covered hand grenades! The idea, the story, the…

  • 401ks,  Return on Investment

    A Better Approach to Financial Planning

    I said it last week. I’m going to say it again. Do not lower your expectations as an investor. Did the Great Recession leave you wary? Most likely. As you evaluate your portfolio and establish your goals, you should consider on what your portfolio is based. Many financial advisors build their client financial plans using software that forecasts that stock market returns vary according to the normal distribution (that so called “bell curve”). As a mathematician, if it was true that market returns followed this curve, it would be an easy format to use. Typically, distribution curves are predictable. Unfortunately, stock market returns are not nicely grouped in a bell shaped curve.…

  • 401ks,  Return on Investment

    401(k) Developments

    It’s my pleasure to introduce Rowena Lei, the newest member of the Adams Financial Concepts family. As a recent graduate from the University of Washington, Rowena majored in History. Monday was her first official day in the office. She’s a bright, talented young woman and I’m very excited to have her on board. Over the next few months, she will play a crucial role as we continue to develop our 401(K) program. Why is this important? I have talked often about 401(K)s. Frequently On The Money we’ve explored the historical development of 401(K) plans, their pros and cons, and the upcoming changes such as transparency of fees. In the next few…