401(k) Participants Need Credible Advice, and Quickly
It’s no surprise to anyone that 401(k) investors need help, or should I say NEEDED help during the historic volatility we have experienced since the fourth quarter of ’07. During that time, mutual fund companies, insurance companies, and the broker dealer world has been fighting over providing advice to those investors. Unfortunately, the investors are asked to be patient while the DoL sorts this issue out…which the industry has been awaiting since the PPA was passed in 2006. On the other side of the coin, my opinion is it is better to delay moving forward than create a law or opinion that either establishes a conflicted advice environment or “throws the baby out with the bath water.”
In future posts, we will outline what we believe to be a clean, conflict-free and trustworthy model for investment advice that will work. While it might not be what the mutual fund and insurance companies would like (not to mention the broker dealers), it is a participant-centered model…which is what ERISA has been focused on since it was written. More to come…
There is no doubt in my mind as a fee-only financial planner for individuals and a plan-level consultant to a number of 401(k) plans that participants need direct, UNCONFLICTED investment advice. Education is a great thing, but it doesn’t change behavior. Some say any advice is better than no advice, I disagree. Congress should do this the right way, advisors with conflicts of interest or who otherwise might be tempted to offer tainted advice should be kept out.