Why Aren’t You Managing Your Clients’ Employee Retirement Plans?

Big news from Fidelity Investments earlier this week: On Tuesday, the company announced the Fidelity Planning & Advice product. This new offering is in part designed to help individual company 401(k) and 403(b) retirement plan participants take better advantage of their default menu of mutual fund investment options.

Fidelity now covers the entire spectrum of company 401(k) and 403(b) offerings. On one end is the seldom-used do-it-yourself Fidelity Brokeragelink account. On the other end are the widely used Fidelity target date mutual funds.

Basically, this new product will help design a financial plan tailored to an employee’s specific investment goals and financial situation. The employee’s company 401(k) or 403(b) retirement plan account will be included in the financial plan.

Fidelity states that individual investors who sign up for this new account offering will receive professional and personalized investment management along with ongoing updates as they progress toward their personal financial goals.

But isn’t that what you already do for your existing clients? Therefore, do you now provide these same investment management services for you client’s company 401(k) or 403(b) retirement plan accounts?

And if Fidelity now can charge annual advisory fees on client company 401(k) or 403(b) accounts, then why can’t your firm?

Registered investment advisors and investment advisor representatives, you have no excuse. Broker-dealer representatives, you now have your homework assignment.

Don’t even think about the excuses I have heard from investment advisors over the years. ERISA, the Labor Department or the best-interest contract exemption will not prevent you from providing investment advice on company retirement plan account assets.

If fact, if you establish an investment advice relationship with a client while he or she is still working, you are on much more solid ground for the company 401(k) or 403(b) rollover upon their retirement. But that is a subject for another time.

Let’s call a spade a shovel. Fidelity is now offering a managed account product that uses an automated investment platform. The managed account includes a client’s company 401(k) or 403(b) retirement plan account. Fidelity will have the client’s authorization to charge an annual fee for asset allocation plan spread across the default menu of company 401(k) or 403(b) retirement plan mutual funds.