Tuesday, November 21, 2006

Frustrated with Big Company's 401k retirement plan

Unlike other big, large, international corporations, I had the luck to choose an employer who runs it's 401k plan through a well known retail (non-discount) brokerage (AKA "Big Brokerage").

What does this mean? Well anyone will recognize the broker's brand name.
It also means our accounts will be laden with unnecessary fees, expenses, etc....

Yesterday I called the customer service group at our retirement plan administrator (the big fat brokerage) and asked them a few questions:

1. Q: Why is it so difficult to find the expense ratios for our investment options?
A: No one asks. Your the first person in three weeks.

2. Q: Well what are the expense ratios?
A: I don't know.

3. Q: What do you mean you don't know, isn't the expense ratio an important factor in determining the return?
A: No one ever asked.

4. Q: Do you have a table listing the expense ratios on the self-service website?
A: No, but you can search through the prospecti on-line and find it in there.

5. Q: I tried and found less than half of the prospecti available on line, what can I do, I'd like to make my decisions very soon?
A: Oh, I can help here, let me mail them to you.

6. Q: Are there loads or fees with associated with any of these funds beyond expense ratios?
A: No, your firm pays them for you. It's a benefit.

7. Q: Do they pay the expense ratios, too?
A: No, you pay that, expenses are not a benefit.

8. Q: You know, it seems like Big Brokerage really doesn't want me to know the expense ratios..
A: Oh, I wouldn't say that - no one ever asks - we would never try to hide expense information from a client. Besides, we don't have the ability to put expense information on the self-service website!

[thunk, thunk - makingourway is banging his head on his desk - why do all the discount brokers, morningstar, etc... put the expense ratios on-line in simple convenient charts - you'd figure a full-fee non-discount Big Broker would have enough fees to afford to do it!]

I am now convinced that Big Broker does not want it's customers to know it's fees. Such knowledge would diminish their income. Better to leave the poor suckers happy and ignorant.

I'm too new to start shaking things up regarding this matter, but I really resent the arrogance Big Brokerage treats it's customers. We're not fools.

It's too bad it would take a law allow direct trustee to trustee transfer of 401k plan assets without requiring the closure or end of participation in your employer's 401k plan. Apparently only Simple IRAs allow such an action.

Why doesn't the consumer union take up the challenge? This would be a meaningful benefit for PIRG's to take on - rather than foolish self-serving class warfare rhetoric - everyone would benefit from it.

Regards,
makingourway

4 comments:

fin_indie said...

Mind disclosing who Big Brokerage is? :P

RetiringEarly.com

Armen said...

Most recent annual survey from the Profit Sharing 401k Council of America (PSCA) reflects growing participation in automated 401k deferrals. It shows that last year along six million participants were added in around 51 profit sharing plan. Also, the average deferrals were 5.4% for average compensated participants.
Appears at 401K Tips

StealthBucks said...

All unacceptable answers from "Big Brokerage" They are legally obligated to provide and no employer "pays the loads" They may be waived and often are due to the size of your plan. You need to hit the HR department up with this stuff. This industry is hyper competitive and a lot of "big brokerage firms" charge less than the market leader and provide kick butt service. You should demand the same regardless of the size of your companies plan.... Never tolerate b.s. Confirm all this with your Financial Advisor.

Anonymous said...

Probably it is Merrill Lynch? If these are standard ML funds (now Blackrock funds) you should be able to get the info on expense ratios off of Yahoo. It is pretty amazing that they aren't more helpful in that regard. But I don't expect much now from big banks and brokerages after our experience with Citibank.