Cornerstone

Got a Plan?

I recently met with a couple to talk about their finances.  They were in their mid 50's, decent job, too much debt and too little savings.  Here's the question...If the clock could be rolled back, do you think that they would have made changes?  If so, what would the change be? 

Their answer...We would have had a plan and someone to help us monitor our progress.

With trillions of dollars in 401K plans today, why is it that substanially all the participants are without a plan?  I believe the primary reason that participants make investment mistakes is because they don't have a plan and therefore no foundation to their investment decisions and choices.

Think about it, when's the last time you took a vacation without a plan?  You know when you're leaving, where you are going, what you are going to do, how you're going to get there and when you're coming back!  More thought and analysis goes into vacations than investing for our futures.

So what's the problem?  Give the participant access to a qualified advisor who can help them develop a game plan for achieving their goals.  It's their money, why don't they deserve the right to have access to a professional...even Tiger Woods has a coach!

An annual education seminar is OK...but, decisions regarding your financial future deserve more than pizza, soda, and "Investment 101...Asset allocation and Risk Assessment."  I have difficulty remembering everything that's taught in an hour...I believe a person's financial goals are worth more than an hour of education. 

Where's Your Money?

Everyone has a great message, a great presentation and a great answer for your 401K plan.  They'll even tell you what questions you should be asking them! 

But if you want to know where the rubber hits the road...Ask them this question.  "Where do you have your money invested?"...yes, that's the sound of silence or the roar of the excuse machine starting.  If they won't buy the pots and pans why should you?   

Your risk profile may be different and your resulting asset allocation may differ, but...if they're recommending funds or investments are they included in their own portfolio?  It's just a question...

Full Disclosure...There's another Way?

In a recent meeting I informed the plan sponsor that I wouldn't be traveling to Hawaii on his or his employee's dime.  He looked confused so I elaborated on the subject of "soft dollars" and that because I was an indepedent advisor, the only way I'd get to Hawaii or take an Alaskan Crusie was if I bought it myself.  Needless to say, that spurred a long conversation about "hidden and unknown fees." 

Sure, if you've enough time and have just completed a speed reading course, you just might find those pesky details that weren't brought specifically to your attention.  And they're typically not little in terms of dollars and worst yet, they're typically charged to the participant's (Employee) account.  Which means you've failed to fully disclose the actual cost of the plan to your employee.  Let's hope none of your other advisor's work like this...creating liability versus helping you manage or minimize it!

My father often told me "Son, there are no free lunches."  Amen Dad, Amen.  Just remember...if the person selling doesn't own the goods, they best have an extraordinary excuse or reason why.

John Wasik wrote a great article regarding this subject in the February 7, 2005 posting at Bloomberg.com...check it out.  John suggests that you have rights and its time the hide-and-seek games be done. 

I couldn't agree more!  If you don't have the guts to talk about all the fees then take your deceitful game somewhere else...hard working American people deserve better.