If you are like many of us, you believe your employer-sponsored 401(k) plan is “free.” After all, you do not receive a fee report outlining the calculation of your pricing. And perhaps with respect to your personal investing, you or others you know may also have reason to believe investment advice is virtually free. For instance, one commonly heard claim some advisors make to clients is: “You don’t pay me. My firm pays me.” No wonder such investors assume they are getting a free lunch.
Kerri and Dan’s experience illustrates this important concern. Kerri and Dan are entrepreneurial and own a law firm that they have grown into a successful business with close to one hundred employees. They established a company 401(k), so that they and their employees could save consistently for retirement. Believing their 401(k) to be virtually free, they hired the same advisor who provided the 401(K) to assist them with the management of their personal assets. It did not occur to them that the absence of a quarterly fee report outlining the calculation of pricing–for both their company 401(k) and personal portfolios–was a signal of hidden costs.
What prompted Kerri and Dan to question their current financial advisory relationship and to schedule a meeting with Entrust for a second opinion? It was the attention-getting new regulations, applicable to employers offering a company 401(k). The new governmental regulations, which among other things emphasizes the employer’s responsibility to provide transparent fee disclosures, caused Kerri and Dan to realize that they were not exactly sure what their investment management expenses were.
Entrust’s fee-based business model and long-standing commitment to transparent reporting of investor costs appealed to Kerri and Dan. Our work together led to the identification of hidden expenses that were substantial. We were then able to provide a proposal to fulfill their 401(k) and personal investing needs that utilized transparent fee reporting and less expensive investment management.
Common examples of hidden expenses that many investors pay without realizing it include:
Revenue sharing among mutual funds, another investment company and the advisor
Monthly administrative fees that provide additional compensation
Excessive internal expenses within mutual funds
Like Kerri and Dan, you may be ready to move beyond hidden costs such as those named above and instead, discover the benefits of a transparent fee model to fulfill your investing needs. We would love to start a conversation: firstname.lastname@example.org or (610)687-3515. Better yet, if you are a business owner and would like an evaluation of how much your “free lunch” firm 401(k) and personal financial advice really costs, contact us right now for a second opinion: email@example.com or (610)687-3515.
Your portfolio is comprised of a variety of ingredients. These ingredients–typically stocks, bonds, and real estate (perhaps in the form of mutual funds)–are combined based on how much risk you want. But is it possible to keep your risk-level on track over time?