Secrets of 401(k) Success: Performance
A successful 401(k) plan can help you and your employees save for a financially secure retirement. But the success of your plan depends heavily on the performance of the funds in your plan.
On your journey to a financially secure retirement, think of your company’s 401(k) plan as the vehicle that will get you there. The funds in your plan are the engine that powers your vehicle. And like any engine, your funds lineup needs regular maintenance and monitoring to ensure you stay on course.
A diverse lineup of funds
Your 401(k) plan should offer a reasonably diverse lineup of funds that perform well, do not require active management, and have low fund expenses relative to their peers.
To ensure consistent performance, your 401(k) plan’s fund lineup should be monitored on a quarterly basis by the plan sponsor and financial advisor. This monitoring should include benchmarking the returns, expense ratios and other industry-recognized evaluation criteria.
Additionally, an investment policy statement should be in place to outline the removal and replacement of any fund in your plan’s lineup that fails the monitoring system.
Avoid revenue sharing
Revenue sharing is the practice of adding additional non-investment related fees to the expense ratio of a mutual fund—a form of commission to the Third Party Administrator (TPA) and financial advisor. It’s a practice that was often used to reduce charged expenses prior to fee disclosure requirements.
Steering clear of revenue sharing helps minimize fees and avoids any associated conflicts of interest when funds are being recommended and offered for your 401(k) plan.
Sticking with our retirement journey analogy, you need a good GPS to guide you on the most direct route to your destination. Apollo Wealth Management works with individual employers and employer member associations, such Value Point Associates (VPA), that offer affordable, competitive 401(k) plans. And as plan sponsor, they assume the majority of plan administration responsibilities and risk, including implementing a robust plan for monitoring performance and actively managing your 401(k) plan’s fund lineup.
Contact Apollo Wealth Management at Billo@apollowm.com or 716-783-1610 to find out more. And be sure to watch for our next blog in the “Secrets of 401(k) Success” series.