Why: The Ultimate Quest for the 401(k) Plan Fiduciary!
Thank you again to Matt Sommer, CFA, CFP of Janus Capital Group for lending your insights to this episode of the 401(k) Fridays Podcast. If you have not had a chance to listen to the first episode of our three part mini-course on the Fundamentals of 401(k) Investment Menu Construction, click the player below.
And now for this installment of the 401(k) Fridays Fiduciary Fact and Folly.
If your plan was selected for an audit by the by the Department of Labor, and as a fiduciary you were interviewed and asked, “How were the investments that are made available to your plan participants selected?” How comfortable would you be answering that question? I am not suggesting that every plan fiduciary become an investment expert or start reading up on modern portfolio theory instead of watching your favorite TV show. However, what the DOL does expect and frankly what your participants should expect is that you are able to relay a basic methodology that guided your choices around your investment menu design. In my day job as a retirement plan consultant, I see dozens of different investment menus in any given year. One thing I find in common with most of them is not the number of investments, not the names of investment companies and not even the asset classes they have chosen, what I find is today’s fiduciary fact, more often than not, those at the plan sponsor who are charged with designing, selecting and monitoring their investment menus struggle to explain why their current investment menu is designed the way it is.
My hope is that with this episode, and the remaining two episodes in the investment menu construction mini course you are introduced to key concepts, terms, ideas and discussion points you should be thinking about when either evaluating or redesigning your 401(k) investment menu. With the ever increasing importance of 401(k) plans in your employees retirement strategy it is critical that you have engage in a quality dialogue with your service partners, ask good questions and have the proper perspective to make more informed decisions that will drive better investment outcomes for your participants and provide you and your fellow plan fiduciaries more protection. As we have talked about on prior podcasts, whether it be with investment menu design or other fiduciary decisions, taking a little extra time to dig deeper than just what needs to be decided and getting to the all important why you are making certain decisions, is not fiduciary folly.
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If you would like some more personal support to better understand the concepts of investment menu design, or some specific questions to ask your service partners to guide an investment menu design discussion, send an email to firstname.lastname@example.org. There is no pressure and no commitment, and who knows, we might be able to help!