Researchers once looked at some data to try to figure out why many poor 401(k) investment choices linger on fund lineups. The researchers identified one fairly clear explanation: a sub-par fund is much more likely to stay on the menu if it\u2019s managed by the mutual-fund company that\u2019s helping administering the plan.<\/p>\n
While it\u2019s very easy to point to the Fidelitys and American Funds of the world for blame, the fact is that regardless of whether you are dealing with a bundled or unbundled product, poor investment options are dependent on the work or lack thereof of the financial advisors and\/or the plan fiduciaries you hired as a plan sponsor.<\/p>\n
My old law firm was using an open architecture platform where they had a fund lineup that hadn\u2019t changed for 10 years. The culprit? The fact that they never bothered to hire a financial advisor until I told them it was a good idea. The fact that they didn\u2019t hire any of the ones I recommended, that\u2019s another story.<\/p>\n
There are too many plan sponsors who don\u2019t have a financial advisor and there are too many financial advisors who don\u2019t do enough of a credible job to merit the fee they are getting.<\/p>\n
Perhaps plans on mutual fund company platforms are more likely to have stinky fund lineups, but it\u2019s still dependent on a plan sponsor and\/or financial advisor not doing their job.<\/p>\n
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