You must know about the shoemakers\u2019 children and how they go barefoot and have no shoes. In the retirement plan industry, we have retirement plan providers and their employees\u2019 retirement plan.<\/p>\n
I know, I have been there. The third party administrator I worked for didn\u2019t have a great plan, it was often alleged we switched platforms to salvage our premier \u00a0pricing with a certain insurance company.<\/p>\n
So for me, it\u2019s no surprise that Fidelity is being sued by a former employee over their own 401(k) plan. While I don\u2019t know all the facts and it will be decided in the courts, one fact (if true) fascinates me.<\/p>\n
I often waste time analyzing irrational behavior through rational eyes and I always ponder: \u201cwhat were they thinking?\u201d So when I hear that part of the complaint is that all of the mutual funds in the Fidelity plan were Fidelity funds, I ask: \u201cwhat were they thinking?\u201d<\/p>\n
When you have thousands of mutual funds out there and hundreds of mutual fund companies, it\u2019s just amazing that any plan sponsor (whether it\u2019s a mutual fund company or not) thinks it\u2019s prudent that every fund on the plan\u2019s lineup is from the same mutual fund company. It doesn\u2019t look right and it doesn\u2019t look prudent, especially when there is no mutual fund company that has superior success in every sector of the market. In addition, any plan that only has funds from the same mutual fund company are often being administered by bundled providers who are mutual fund companies (i.e, plan being administered by T. Rowe Price with only T. Rowe Price funds). How is a plan sponsor able to offer a rational explanation that it was prudent to select mutual funds from one company? I don\u2019t think they can, especially when the mutual fund company is one of the plan providers.<\/p>\n
Often in the retirement plan business, if it doesn\u2019t look right, there is usually something wrong. Any plan using the mutual funds from only one mutual fund company is a plan with something wrong.<\/p>\n
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