I've been fortunate to be involved in supporting over 4,000 retirement plans, across six very different parts of the country, from the major metro area of Chicago to the most beautiful and rural parts of the country of Idaho, Montana, and Wyoming. Even though these parts of the country are very different, the biggest miss was consistent, whether downtown Chicago or off the beaten path in Idaho, and it's not what most people would expect.  

I found that the biggest miss in 401(k)s to be viewing the plan in a very narrow-minded and limited one-dimensional way, both from the employee and employer perspective. 

Is a 401(k) just a retirement program that will impact employees for decades down the road at age 65? Is it just another benefit that employers need to offer?  

No!!! It's not just that.  It's so much more.  

We need to change the narrative, change the perception and change the entire experience of the 401k.  It's the job of the advisor, with the employer's support, to promote & elevate a plan to its highest level so that it becomes both the Employees' & Employer’s most valued benefit.

In addition to the obvious tax benefits & one of the most effective ways to accumulate assets & build wealth, 401k enables employees to Build Confidence in their Future and Retire on time with Dignity. It’s a benefit that will CHANGE LIVES!

If we accomplish this for participants on an institutional scale, the 401k is one of the most effective business productivity tools available. It’s hard to quantify, but upgrading the Retirement Program can change the culture of an organization, increase productivity and benefit in multiple ways below:

Improve Quality of Life - Promote happier, healthier, more confident & optimistic employees 

Inspire Employee Loyalty & Reduce turnover. Improve Employee retention & relations 

Help employees feel empowered, independent & in control of their future, achieve a sense of accomplishment, peace of mind, reduced stress improved health vs. fear, dependency, uncertainty & denial.  

PR - Promote the Sponsor thru positive word of mouth in the community.

Help EEs strengthen their families, have happier marriages & even reduce divorce rates

Reduce health insurance costs thru a healthier work force with less stress and enabling older EEs to retire. 

Create a healthy & dynamic business model where older Employees can afford to retire & younger Employees can join the firm. 

Boost Morale & Productivity… create BUZZ & ENTHUSIASM at the work place!!! 

The impact a high-functioning Retirement Plan has on Participants & Plan Sponsors has a cascading effect on the local community, region, state, and our country. High-functioning 401k plans help maintain America’s strength as the leader of freedom and independence and secure our position as the envy of the world. 

One Plan Sponsor joked after I shared this and said “It sounds like 401k is the Secret to Life!” Maybe not, but we need to help people reframe & experience their 401k differently. It’s our responsibility & opportunity as advisers to help others understand. We are in a perfect business environment to review and upgrade your retirement program. You may need to fix it and beef it up with additional employer contributions and other key changes, but the impact will far exceed your expectations if done right. 

I've been fortunate to be involved in supporting over 4,000 retirement plans, across six very different parts of the country, from the major metro area of Chicago to the most beautiful and rural parts of the country of Idaho, Montana, and Wyoming. 

Working With Over 4,000 Plans, Here's The Biggest & Most Consistent Miss

Is passive equity fund investing the way to go? 

The argument we constantly hear is that most actively managed funds do not outperform passive investing, so why pay the extra cost? Logical arguments with 100s of articles and constant debates on the topic, but often we only hear part of the story.  There  are a few key points:

To get a clear comparison of active vs passive, we need to be clear on the time frames being used and the indexes being compared. Are the time frames using 1,3,5,10 year results? Does the index being used accurately reflect the objective of the fund and how it’s managed? 

By comparing just shorter-term results, often this will eliminate some of the best performing long-term funds. For example - many top funds based on 10 year results, have  1, 3, and even 5 year results in the bottom quartile or bottom half of their peers. If your time horizon is 10+ years, investors need to be careful about screening funds on shorter-term results.


We often hear that “80-90% of actively managed funds do not outperform passive.“ * If that statement is true, what does that say? 

Answer - 10-20% of actively managed funds actually do outperform passive. Then the key becomes finding those 10-20% who are adding value & exceeding passive. Which is a reasonable request & function of your financial advisor. * (Source-First Ascent Asset Management. Ten facts clients need to know to achieve investment success. 2021. Firstascentam.com)


Payouts & the distribution phase - if an active manager can reduce volatility & control downside risk, that can be a significant advantage to an investor who’s taking payouts. Known as sequence of return risk. 

I’ve described this like having brakes on a car. In rising markets ( going up hill) there is no need for brakes. However, in falling markets ( going down hill) we need brakes or else our car will get out of control! A good active manager can give you brakes. 


If an active manager provides just a small increase in results ( alpha) does it even matter? The answer is yes. Over many years, even small results can dramatically improve outcomes, much greater than most of us realize. Example - if an investor is able to get just 100 basis points ( 1 percentage point) better results over 40 years, that can result in 16 additional years of retirement spending. ( Source-Capital group - American Funds. Lit No MFGGEOS-044 10-21. Results Matter. The shark fin report.)


Passive funds are lower cost, but is selecting the right funds just about “a race to the bottom “ ( cost) ? It should be about results in both rising & falling markets. 

In Summary - Active investing can add value, especially in retirement accounts designed for longer time horizons. Also, especially if an investor is taking distributions. The key is to find the right active managers.

Is passive equity fund investing the way to go? The argument we constantly hear is that most actively managed funds do not our perform passive investing, so why pay the extra cost?

We know this process in and out.  We're your trusted partners in Retirement Planning. 

One of the most damaging fiduciary breaches that I witnessed over my career in the retirement plan industry was advisors recommending to the 401k plan sponsor decision makers to terminate their plan and instead roll plan assets into individual products for each participant.  

I am not referring to extremely small 401k plans where a company may have shrunk, and a 401k is no longer a fit.  I'm referring to larger plans, where 401k is clearly the right fit. 

What’s the logic an advisor would use to convince the decision makers of a 401k to do this?  

Normally, they promote three reasons, none of which are accurate: 

1.  Creating fear with the plan sponsor and decision-makers - promoting the idea that their fiduciary responsibility & personal liability of a 401k plan is too high, too risky, and not worth the risk.  

2.  More customization - Individual investment products offer more personalized for each employee & a better fit. 

3.  Cost effective - the cost of a 401k plan was too high and it’s better to have the employee pay for their own plan. 

All 3 of these three points are wrong, misrepresented and big disservice to plan sponsors and plan participants. Plus, this is a Fiduciary breach. 

1.  Fiduciary responsibility can easily be managed and mitigated.  

2.  If a 401k is properly built, it allows plenty of personalization for each individual employee. 

3.  Lowering the cost is just incorrect.  Logic would say that a group program, like a 401k,  covering multiple people & a larger pool of assets would be more cost-effective than an individual program covering just one person. That logic is correct – if properly built, 401k plans are more cost-effective than individual products.

What's the real driver of this recommendation to terminate the plan?  

Unfortunately, the answer is individual products generate more revenue and compensation for the advisor and their firm. Depending on the individual product used, sometimes there can be significant payouts to an advisor who terminates a 401k plan.  

In addition, these decisions can be driven by helping an advisor qualify for trips, promotions & accolades within the advisor community or their region, which are normally based on revenue at the broker/dealer level & GDC (Gross Dealer Concession). Unfortunately, this is clearly a conflict of interest & a fiduciary breach, but I saw this happen too many times. I would find out about it after the fact, which was too late to reverse it.       

If an advisor is not acting as a fiduciary and instead following suitability rules, rolling all the plan participants into individual products could be considered suitable. However, it’s still not the best option for the participants or plan sponsor. 

“A big heart and an empty head are not a legitimate excuse.” 

If a plan is set up poorly, it could be too expensive, but the best option would be to fix the plan, not terminate it. 

An analogy - if your car doesn’t work, do you bring it out in the backyard, toss some dynamite in and blow it up? Then start riding your bike or horse to work, or do you fix the car? Fix the car! The car is a highly effective invention & vehicle – don’t destroy it, fix it. Put some new tires on it, give it a tune-up and some body work, and get it humming again! 

Or if someone has recommended you terminate your plan in favor of individual products and you’d like a second opinion, please give us a shout.

If your plan needs a tune-up we’d be happy to help.

One of the most damaging fiduciary breaches that normally goes unnoticed ...

401ks are one of the most effective ways to build wealth, especially with a generous employer contribution in the form of a match or profit-sharing award, or ideally both. Combined with a strong plan, it's critically important to build an effective employee education & engagement program. Part of that plan involves setting & communicating realistic expectations for employees. This builds trust, confidence, enthusiasm, and credibility… and sets the stage for a highly successful plan. 

There are short-term speculators (gamblers) and long-term investors. A 401k plan is the latter.  The fundamentals of wealth building and 401ks, in general, are not “get rich quick schemes.” A 401k plan is a long-term proven program that requires discipline and patience. Human nature is drawn to the new shiny object or the magical silver bullet. Short-term thinking and our shrinking attention span run counter to building wealth and maximizing your 401k. If someone asks about the latest hot stock tip, they’re headed down the wrong path. 

So, what do you share with employees and participants to help set expectations? 

There are many messages to communicate that go well beyond the scope of a short blog post. However, one message I’ve found that gets great traction and surprises people (pleasantly) is as follows:

Over a 10-year time period, what is the percent chance your 401k account will be positive, double, triple, or quadruple?  Purely based on just investment results, not additional contributions.

10-year results over 88 years from a leading active mutual fund family has produced the following results. The value of an investment over 10-years has a: 

Results like this require selecting the right funds AND allowing those funds to operate uninterrupted. Meaning, don’t shoot yourself in the foot by trying to time the market. Be patient & confident in your funds and allow the talented group of people managing your funds to do their thing.  

It’s been fun to share these results and message with many 401k participants. I always let people guess  the answers before I share the actual results. The guesses are almost always much worse (less optimistic) than the actual results. Example - Over a 10-year time period, what is the percent chance your 401k account will be positive? The normal response or guess is somewhere between 50 & 80%.   

These results are statistically relevant, meaning there is a large enough sampling of 10-year periods ( 88 years & over 570 periods ) to make these results realistic. However, past performance is no guarantee of future results. See footnotes for details of this study.   

Sharing simple information like this has a powerful impact on plan participants and goes a long way toward helping build highly successful plans.    

As a good friend of mine used to always tell investors & his clients, “Money makes money and the money, money makes, makes more money.” Thanks Clay! 

Albert Einstein famously referred to compound interest as the 8th wonder of the world. 

*Source -What makes American Funds different -2022 edition: Class A shares

In good times and bad, an 88-year track record of success in equity funds. Over the years, investors have looked to us to provide superior long-term outcomes. The reason becomes apparent when you look at our equity funds’ results over 576, 10-calendar-year periods since our first fund began in 1934 (as shown in results chart).

Based on results calculated at net asset value with all distributions reinvested. Reflects applicable fees and expenses.Based on Class A share results for rolling calendar periods through December 31, 2021. Periods covered are the shorter of the fund’s lifetime or since the comparable Lipper index inception date (except Capital Income Builder and SMALLCAP World Fund, for which the Lipper average was used). Expenses differ for each share class, so results will vary.

401ks are one of the most effective ways to build wealth, especially with a generous employer contribution in the form of a match or profit-sharing award, or ideally both. 

The best way to predict your future is to create it.

One of the most effective ways to build wealth is your 401k, but set expectations.

Stay up-to-date with the latest news, trends, and expert insights that will empower you to make smart decisions about your corporate retirement plan and your employees financial future. We also host an ongoing video education series covering current relevant topics for both plan sponsors and participants.

Stay up-to-date with the latest news, trends, and expert insights that will empower you to make smart decisions about your corporate retirement plan & your employees financial future. Whether you're a seasoned investor or just starting a new plan, our comprehensive coverage and actionable tips will help you and your employees accumulate wealth and retire on time with dignity. 

We also host an ongoing video education series covering current relevant topics for both plan sponsors & participants. The Plan Sponsor Series is called “News You Can Use”. Intended audience are plan decision makers & fiduciaries. The Employee Series is called “Fireside Chat” Audience is any eligible employee. Conducted at least quarterly. As needed, conducted more frequently & on-site.

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Working With Over 4,000 Plans, Here's The Biggest & Most Consistent Miss

The Active vs Passive Equity Fund debate

One of the most damaging fiduciary breaches that normally goes unnoticed ...

One of the most effective ways to build wealth is your 401k, but set expectations.

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