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The right time, and tool, for reaching out to 401(k) clients

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Third quarter 2015 client account statements were awful. But there was an even more powerful emotional investment loss last quarter. Many individual company 401(k) retirement plan account investors lost the last few years of their stock market gains and contributions.

Individual company 401(k) retirement plan accounts are the birthplace of the “set-it-and-forget-it” and the “buy-and-hope” investment management strategy. The company retirement plan principal losses last quarter have again shaken individual investors to the core.

Now is a perfect time to ask current clients for a copy of their most recent company 401(k) retirement plan accounts statements. Many client households now include two working spouses. The combined company 401(k) retirement plan account balances can easily approach the magic $1 million mark in new assets to manage.

In recent months, all the large robo-advisors have announced tools to reach individual company 401(k) retirement plan participants. The custodian firms and brokerage firms can’t be far behind.

I decided many years ago to aggressively defend my working client and spouse company 401(k) retirement plan assets. The advisor tools that I use recently had a huge upgrade, and I wanted to share the specifics of those tools in this column.

Since mid-August, I have increasingly relied on the most recent generation of the Portfolio Toolkit V2 from the Sherman Sheet. This new tool is the best source of company 401(k) retirement plan menu analysis and management tools that I have found to date. I use this tool in conjunction with the Custom Portfolio Reports service.

The Custom Portfolio Reports shows asset class and sector coverage offered by the client’s company 401(k). Advisors can use this tool to show a client or prospect exactly how many of their company 401(k) retirement plan mutual fund options are in the right place. It also highlights the specific mutual fund options that should be avoided.

The Portfolio Toolkit offers a number of model portfolios. The tool has a very effective dashboard interface. I prefer the STAR Min/Max model for my company 401(k) advice clients. 

This model is crafted to operate even in the most restrictive company retirement plan environment. I don’t have to worry about minimum hold time or frequency of trading restrictions. The STAR Min/Max model only uses asset classes that are most likely to be found in a company 401(k) retirement plan menu.

Assets & advice

Any advisor that currently operates in the company 401(k) advice space can relate to finding a company 401(k) retirement plan menu that has minimal asset class coverage. I came across a mere five-option mutual fund menu a few weeks ago that had three large-cap mutual fund options and one bond fund as the entirety of its options.

The Sherman Sheet Portfolio Toolkit solved that problem for me. Their “Minimum 401k” option uses just an S&P 500 fund and a bond index fund as benchmarks. The STAR Min/Max model creates an approximate simulation of what the long-term investment performance would have been.

Wirehouse advisors who want to build a company 401(k) retirement plan advice niche business are really going to appreciate the following: The Sherman Sheet STAR Min/Max model has received the DALBAR QDIA Validation award for use in the management of company 401(k) retirement plan assets.

This designation provides in DALBAR’s words, “fiduciary relief,” in the eyes of the government bodies that regulate the management of retirement plan assets. This DALBAR QDIA Validation is a real coup in the individual company 401(k) retirement plan investment management space.

In my experience, the most powerful feature of the Sherman Sheet Portfolio Toolkit is the ability to create custom benchmarks that compare the investment performance of the client’s past or present company 401(k) retirement plan holdings, against the proposed model. This comparison is an extremely effective way to draw attention to the potential dollar difference — what I have called “the cost of the problem” — between the client going it alone versus using unbiased, third-party company 401(k) retirement plan advice.

See also:

10 best states for early retirement

The inherited Roth rollover: How to avoid unpleasant surprises


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