I ??401k's!!!!!

I am still riding a natural high from having had an opportunity to speak with my fellow high-achieving advisors on what I love. While the other advisors spoke about what they are passionate about - advanced life insurance planning strategies, the latest in technology, and how to properly acquire another advisor's practice - I laid it all on the line. I LOVE 401k plans. There was no doubt from the beginning of my talk until the end where I stood.

401k advisors are specialists in what they do. Industry wag Fred Barstein estimates that fewer than 1,500 of 300,000 advisors focus on retirement plans. That is less than 5% of the total. There are many reasons for the small (and dwindling) number of advisors in the retirement plan space.

Part of it is learning. When I reply to your email, look at my signature line. There are 7 credentials that follow my name. All of them are 401k related. And I have two more I am likely to add. While the cynics in the audience would say various groups create and churn out credentials as a way to make money, the ones that I have earned have been hard-won and represent a fair amount of perspiration and preparation. Each credential represents a specific body of knowledge.

Aside from a steep learning curve, there is the issue of low fees that seem to be going lower. Atty. Jerry Schlichter has spawned a whole industry of attorneys focused on 401k fees and other issues. The fee issues are primarily on the investment side but I dare say this has also had an ancillary effect of putting pressure on advisor fees, compressing them.

The issue of fiduciary liability is also very real. This is particularly true for advisors serving as 3(21) or 3(38) fiduciaries. I have not met many advisors who enjoy being sued! :-) So when you combine low (lowering) fees with lawsuits, it is no wonder that advisors do not flock to the 401k space.

Speaking of fees, if you think about an individual with $1 million to invest and if the individual hires an advisor to manage the money, the advisor might charge 1% - 1 .5% on the balance. At face value, that translates to $10,000 - $15,000 in annual fees. On the 401k side, a $1,000,000 might only be charged $6,000 - $7,000 in fees. It takes a lot more 401k plans to achieve the same kind of compensation one might see in the individual wealth management market.

And finally, I would also point out that 401k advisors need to be well-versed on IRS and DOL regulations. I take it one step further and try to see which regulations will impact my client 401k plans and how I might lessen the impact or prepare the client. It is not enough to be a passive vehicle absorbing information.

So why do I love 401k's in the face of daunting adversity? After 18 years of managing my 401k practice and 34 years in the industry, I guess I have found something I am good at! All kidding aside, I enjoy what I do. I love meeting with employees and plan sponsors and educating them on various topics. I love seeing people save for their future.

And yes, I remember a truck driver, Jorge. Jorge worked at a produce company. As a truck driver, his job was to move vegetables from Point A to Point B. His skills and talents were soon noticed by UPS and he was given an offer he could not refuse. As he left for his UPS job, he excitedly showed me his 401k check made out to his new 401k plan. He was so excited over how much he had saved and how he had not noticed the difference in his paycheck. Out of sight, out of mind? In any case, the joy I felt in that moment encapsulates why I ??401k's!