Billions

How a $1.6 Billion 401k Plan Figured it Out

I saw a note (link might be blocked) that a $1.6 Billion 401k plan decided that revenue sharing was, among other things, not a good idea for their plan.  Duh! Was it that hard to figure out?  What took so long?  They could have read this blog in 25 seconds and realized this.  But that would have been too easy.

They interviewed six different firms over seven months and used a consulting firm with an impressive sounding name.  I am sure they generated reams of documents with analysis as well.  I would guess that many people were involved in this process and there were multiple meetings and discussions and consultations and…  I wonder how much they paid for all of this amazing advice?

It turns out that they “negotiated” lower fees on some of their fund options. Congratulations! But does a plan this size really have to negotiate hard? All sarcasm aside, I applaud them.  They ended up with a better plan which will clearly save their employees money – which is great.  But will all due respect, HAVING A GREAT PLAN IS JUST NOT THAT HARD!  I could have told them how to do it in 30 minutes.  

I know they aren’t asking,  but my suggestion would be to write a three page Investment Policy Statement (IPS) and use a bunch of index funds from Vanguard.  Make sure that the IPS is written so that most of the employees in the company can understand it – not just a bunch of suits from financial services firms. Get rid of the consultant.  Save all of this money for something else more useful.   Simplify the whole thing.  Or, as Albert Einstein said, “Everything should be made as simple as possible, but not simpler.”  

 

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