Founder, Saul Nirenberg & Co. (www.portfoliostrategy.com); New York
Advice on 401(k) Business: “First, put together the best investment options…. Second, make sure [your] fees are really competitive.”
When it comes to knowing their own companies, human resources departments are clearly experts. Knowing their way around financial services and the 401(k) plans they’re in charge of? Many are clueless.
Enter: Saul Nirenberg, a 34-year former broker and brokerage sales manager, who advises HR departments both on how to select advisors to manage retiring employees’ 401(k)s and on the specific plans offered.
The ex-L.F. Rothschild & Co. (later Oppenheimer) partner says that many smaller firms — those with fewer than 3,000 employees — are paying high fees for incompetent 401(k) investment advice and receiving puny employee services to boot.
“The HR department needs a professional backup as to the kinds of services that actually are available and what they should be paying for them. Without that, they’ll just do whatever the service provider says,” says Nirenberg, who 10 years ago launched Saul Nirenberg & Company, in New York City. He is affiliated with neither a brokerage nor other financial services firm.
Since leaving Oppenheimer in 1990, the urbane, forthright Nirenberg has become a mediator and arbitrator for the New York Stock Exchange and Nasdaq, and serves as an expert witness in securities arbitration and court cases. Three years ago, he added 401(k) work to his mix.
“Saul’s wealth of knowledge and insight about the way things operate within the financial industry and marketplace is invaluable,” says Atlanta attorney Boyd Page, senior partner of Page, Perry, LLC, whom Nirenberg has assisted on investor cases.
Nirenberg’s advice to advisors pursuing 40l(k) business? “Go in and offer investments that [your] experience has shown to be really needed by individuals in the company — and price them competitively. Be sure that all offerings are the best available.”
Advice to HR departments choosing an advisor? For starters, they should talk to no fewer than three FAs or organizations, bypassing brokers with less than a decade’s experience, he says.
Interviewing prospects, HR departments ought to elicit FAs’ thoughts on how 40l(k) funds should be invested and determine any unique benefits each advisor will bring employees. When vetting independent investment advisors, companies need to find out year-by-year investment results for the preceding 10 years, as filed with the Securities and Exchange Commission, and where client monies are custodied, Nirenberg recommends.
The native New Yorker analyzes and counsels, of course, on appropriate service provider charges and even furnishes a list of questions to ask FAs — along with an idea of good answers.
Once the advisor has been selected, Nirenberg’s program ensures a flow of information to plan participants and strives to help them understand the risks and rewards of their investment choices.
Indeed, service providers should live up to their title and serve up a host of helpful services, he says.
“If employees were being paid attention to by service providers, they’d do better in every way. They need to answer questions and educate investors about diversification, for example; what the mutual funds are and what each is about,” says Nirenberg, whose program is implemented by the HR department or supervised by his firm.
“Advisors must provide jargon-free information about investments and should suggest that the company have monthly or bimonthly meetings with employees, where they can get good, down-to-earth information,” according to Nirenberg.
Further, it’s necessary for advisors to inform employees as to the importance of holding a more conservative portfolio as they move closer to retirement. “Employees ought to be able to ask questions about portfolio risk, such as the risk of being overly conservative or overly speculative — and get answers,” he says. And every month or so, investors should be supplied with an analysis of their investments.
“If service providers do this,” he continues, “the [firm] will end up with employees that are much more loyal because they’ll see they [care] about them. And it’s good for the service provider to be complimented about information they’re getting out to employees.”
Born in Brooklyn and reared in Manhattan, Nirenberg is the son of Joan Alison, co-writer of the play (Everybody Comes to Rick’s) upon which famed film Casablanca was based. With a bachelor’s from Dartmouth and a master’s degree from Dartmouth’s Tuck School of Business, he began his career in Dad’s shirt-making business.
But when, he recalls, Far East imports began “knocking the socks off” small U.S. manufacturers, he sought greener pastures. “I looked around for a place where I could make the most money and not have to carry an inventory of shirts. That was the brokerage business — so I went into it.”
In 1966, he started as a broker with L.F. Rothschild, in New York City. By 1983 he was a partner and the sales manager of its largest branch. “I didn’t [make] partner because anybody thought I was smart. Back then, the moment your gross commission exceeded $600,000, you automatically became a partner. So in 1983, I worked like a dog and did as much trading as I possibly could to get me over $600,000,” says Nirenberg, who, as sales manager, supervised the 100-broker Manhattan office.
After leaving Oppenheimer, he opened his own advisory firm, managing money until 1992, at which time he began focusing on the expert witness work he’d started two years earlier.
Certainly, Nirenberg — wed to publishing executive Julie Lewit-Nirenberg, founder of multi-media Eat!Move!Play! fighting childhood obesity — is out to demystify and improve 401(k) plan management. As he sees it, the critical first step is signing up highly competent, competitively priced service providers.