Trying to fight the good fight!

[lakelife]

My partner is currently using a very expensive active fund managing firm for his financial planning and investments. Were talking expense going to the firm, the attorneys for the plan, the TPA for the administrating, and the bank where the funds are held. Totaling out at a total of 1.45% expenses.

Its a pooled account as well in a 401k Profit sharing plan set up. He also has a defined benefit plan set up with them as well.

 

Aside from the fact that we have completely different investment philosophies Im trying to stick with the main point being that for a office of 12 people ranging from 22 to 61 a pooled account cant fit everyones needs. I just read through the whole solo 401k thread and it doesnt look like there is still a clear winner.

 

My initial thought is to stick with Vanguard cause I know them. I know they dont accept rollovers but I am assuming they accept transfers from the current 401k right? I also need something simple to set up. He feels like we are unraveling everything.

 

I have about just said screw it and gone with whats already set up. But he is planning on being around another 10 years and it just seems completely against everything I have learned on here. Id love to just set it up with one of these companies, have 20 funds to choose from and let everyone make their own decisions. I currently dont plan on contributing to the defined benefit plan yet so I see no reason to change it.

 

 

[Dr. Mom]

We use Schwab and have for over 15 years.  My husband uses it for his practice's 401k.  I use it for my solo 401k.  In your situation, it could offer the possible advantage of your partner being able to keep his current investments if he thinks they are worth the expense.  You can easily access Vanguard ETF's or funds if you prefer them to Schwab's.  I use a mix of the two.  We use a company in Birmingham, AL, that runs the plan for a set fee.  No AUM.  Some of WCI's advertisers likely do the same.  Good luck.  Keep fighting!

[lakelife]

Thanks for the advice Dr. Mom! I dont think he would be able to keep his because his are in a secret pooled account that you only have accesss to if you give this firm all your money lol!

 

Has anyone heard of Employee Fiducary? Just got off the phone with them and there seemed to be a lot to like!

One point of contact for plans, administrator, and everything else. 1,500 a year administration and .08%AUM fee. Other than that no fees whatsover and you have access to pretty much everything as far as funds go and you can have a fully customizeable plan!

[Dr. Mom]

Wow.  A "secret pooled account" sounds scary to me.  IDK about Employee Fiduciary.  I would want to be sure that the money was being invested at Vanguard, Fidelity, or Schwab with Employee Fiduciary as the company setting up and running the plan.  If not, I would pass or you could be ending up in a similar situation.

[litovskyassetmanagement]

lakelife wrote:

My partner is currently using a very expensive active fund managing firm for his financial planning and investments. Were talking expense going to the firm, the attorneys for the plan, the TPA for the administrating, and the bank where the funds are held. Totaling out at a total of 1.45% expenses.

Its a pooled account as well in a 401k Profit sharing plan set up. He also has a defined benefit plan set up with them as well.

 

Aside from the fact that we have completely different investment philosophies Im trying to stick with the main point being that for a office of 12 people ranging from 22 to 61 a pooled account cant fit everyones needs. I just read through the whole solo 401k thread and it doesnt look like there is still a clear winner.

 

My initial thought is to stick with Vanguard cause I know them. I know they dont accept rollovers but I am assuming they accept transfers from the current 401k right? I also need something simple to set up. He feels like we are unraveling everything.

 

I have about just said screw it and gone with whats already set up. But he is planning on being around another 10 years and it just seems completely against everything I have learned on here. Id love to just set it up with one of these companies, have 20 funds to choose from and let everyone make their own decisions. I currently dont plan on contributing to the defined benefit plan yet so I see no reason to change it.

 

 

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We deal with things like that all the time.  While we do a lot of pooled plans for small practices, one has to know the limit: once you have a large practice, a pooled plan is plainly inappropriate:

http://www.dentaltown.com/Dentaltown/Article.aspx?i=393&aid=5411

Usually companies set that up so that they can slap an AUM fee on that, and that's the easiest way to do it.  And they are not ERISA 3(38) fiduciaries in most cases because very few of them want the discretionary fiduciary role.  However, new fiduciary rules are changing that and they can't act as brokers, so this is also going to catch up to them if they are not fiduciaries.

In short, it is possible to have a low cost 401k + Cash Balance plan with 0.15% average expense ratio investments and NO advisory AUM fees, zero conflicts of interest and all low cost Vanguard/DFA funds, as well as prudently managed Cash Balance plan portfolio.

I've also developed a calculator specifically for comparing various types of proposals:

http://retirementplanhub.com/retirement-plan-cost-calculator/

A combo plan is a more complex plan that does require a good TPA, a record-keeper and an ERISA 3(38) fiduciary.  However, there is no reason to pay AUM fees for any of these providers and you can get a great plan for a fixed/flat fee:

http://whitecoatinvestor.com/how-to-reduce-your-practice-retirement-plan-cost