When I go to buy something – a new pair of shoes, furniture, or dinner at a restaurant – I want to know exactly what I am paying for. You probably do also, unless your name is Bill Gates. Fee clarity is more important than ever.
Since I have been an advisor in South Bend, I’ve gotten to know a lot of people. I’ve been asked on several occasions to join marketing or networking groups. Recently I was invited to join a group which focused on marketing ideas. The ideas seemed good, and I saw some value in joining the group. I thought it may be a great way to plug the upcoming book as well.
However, this week I decided absolutely not to join this marketing group.
Why not ? The group leader did a poor job of explaining all of the costs involved (wimpy?). I went to 3 different meetings, I was bombarded with marketing information, but never once saw cost explained either verbally or in print. When I finally did find out HOW MUCH, it was quite a lot more than what I was originally told. Whatever credibility he had worked to build was gone.
“No B.S.”?…….Yeah, Riiiiiiiiight. One of my first sales managers told me “A confused prospect never buys.”
What does this have to do with 401(k) plans? Simple. One of the biggest problems with plans now is that fees aren’t clearly explained. Employers don’t know costs, and therefore can’t explain them to employees, who are really picking up the bill. Federal law has made it mandatory that all fees for 401(k) plans are clearly itemized and easy to understand.
If a contractor came to my house and told me he would fix my roof for $10,000, and then due to “unforseen expenses” the tab came to $15,000 or more, I’d be upset. You would be too! By the same token, when I review plans for employers, I want to make sure they know all of the fees in the plan. I have also stumbled onto plans which are badly in need of an update. They are still paying for the plan as a ’small’ business, when in fact they could be saving a lot of money once they have reached certain dollar amounts, or breakpoints.
In my book, “Help! My 401(k) Has Fallen – And Must Get Up!” I use an example of cell phones to explain this.
Why would you still pay for a “1980’s backpack style” cell phone, when newer, better, and cheaper models are available?
As an employer, you need to review your 401(k) plan and update it. Don’t be ‘wimpy’. Make sure you know all the costs and your people do too.
You can also get a copy of a free report on my website – “The 5 Biggest Problems With 401(k) Plans – And How to Fix Them”.
You may also contact me on Linked In at http://www.linkedin.com/in/dvoelker or Twitter at http://www.twitter.com/deanvoelker. I also host a weekly financial advice program, Improving Your Financial Health at http://www.blogtalkradio.com/401kcoach.