Retirement plan

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.

Bada Bing, Bada Boom

What Fidelity is offering is not rocket science. Any investment advisor worth his or her salt can provide the same company 401(k) or 403(b) retirement plan mutual fund asset allocation services. And get paid for it too.

Fidelity reads, and sponsors, some of the same company retirement plan participant investor surveys that everyone else does. It’s no secret that individual company retirement plan participants want and need an expert looking over their shoulders.

What is the largest and most liquid investable financial asset in most American households? Especially with two-income families, it is the 401(k) or 403(b) accounts.

I opened my first Fidelity individual company 401(k) retirement plan investment advisory account with an attorney at a law firm in my local market in 1999.

My first ThinkAdvisor column on the topic of building an individual company retirement plan investment advice business was published in October 2011.

The excuses I have heard over the last 18 years from investment advisors as to why they don’t manage their best client’s company retirement plan account assets are melting away like an ice cream cone on a hot July afternoon.

Fidelity has now confirmed the want, the need, and the access to individual company 401(k) and 403(b) investment management advice. They are about to charge an average of 50 basis points on client assets that have been right under your nose since your clients opened their accounts.

You have not lost your client’s 401(k) lunch yet. And for heaven’s sake, don’t fool around any longer with your best client’s household company 401(k) or 403(b) accounts.

Your dinner (the rollover) will soon be at risk, too.


Ric Lager is president of Lager & Co. Inc., a registered investment advisory in Golden Valley, Minnesota. He completed the Accredited Investment Fiduciary program at the Center for Fiduciary Studies.