Synergy Asset Management


Managed portfolios, now in your 401(k)!

Many people rely on a financial advisor to properly diversify and manage the assets in their IRAs, taxable accounts, and other qualified accounts. Why should it be any different in your company’s 401(k)?

Many 401(k) plans offer a set of 10 to 20 mutual funds for the participants to choose from, as well as some target date funds. While your financial advisor is able to help you choose an allocation according to your investment objectives, it may not always be the most efficient portfolio.

At Synergetic Finance, we are seeing the 401(k) market moving toward the idea of a managed portfolio. Some investors enjoy researching the different funds and choosing their own allocation, but it doesn’t have to be an all-or-nothing approach. Independent investment advisors are able to construct plans that offer a menu of funds and also the option to choose a managed portfolio.

The benefit of a managed portfolio is that it is based on modern portfolio theory. This means that the portfolio is designed to maximize the dollars within the plan rather than maximize the returns. Without having the wild swings in the returns, dollars grow at a steady pace and big returns are not needed to compensate for losses.

Another benefit to both the employee and the employer is that the investment advisor will sit down with the employees and help them choose which portfolio (conservative, moderate, aggressive, etc.) is most appropriate for their situation and level of risk tolerance. The employee can then review this option year over year to make sure they are still in the appropriate allocation model—just as they would do with their personal financial advisor.

Won’t the fees be higher in this scenario, which will directly affect my investment performance? No. This is because the models will allow the investment advisor to utilize institutional share class mutual funds. These funds have lower fees and no front- or back-end fees.

Also, the independent investment advisor is able to construct the plan to use the third party administrator, record keeper and other relevant parties that charge the lowest fees. Overall, business owners who have switched to this type of managed 401(k) have experienced significant cost savings in their plan—which directly relates to more dollars in everyone’s portfolio.

At Synergetic Finance, we work with business owners to review their current retirement plan and assess the fees they are paying through a complimentary cost comparison. This process is very simple, and from there, we are able to propose a plan that will maximize an employer’s investment return and minimize costs.

When the switch is made, we go to the business and educate the employees on how the plan works and we sit with each employee to discover which model is most suitable for their situation. We also schedule an annual review of each employee’s portfolio to make sure he or she is still moving in the right allocation.

Contact us today to have us run a free cost comparison on your current 401(k) and discuss your options!

To your wealth,

President of Synergetic Finance

Joe Maas

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