Seven Reasons to FIRE Your 401(k) Advisor Now

At the Center for Employee High Performance, we’ve observed a troubling pattern in the 401(k) industry. Many 401(k) advisors, including stockbrokers, bankers, and insurance agents, may be friendly golf buddies, but they are primarily salespeople. Their role is to sell, sell, and sell, and they often lack the expertise required to be financial counselors or coaches. In this blog, we’ll outline seven compelling reasons why you should consider parting ways with your 401(k) advisor and seek a more suitable solution.

Reason 1: 401(k) Advisors Are Salespeople, Not Counselors

The first and foremost reason is that 401(k) advisors are essentially sales reps. They are trained to sell financial products and services, but their role doesn’t extend to providing the financial guidance and support that employees need. They lack the training and time required to be counselors or employee coaches.

Reason 2: Conflicts of Interest

A significant conflict of interest arises when the same person manages the investments of key individuals within a company and other employees. This includes the dual role of managing both the company’s 401(k) plan and personal investments. This dual relationship can unknowingly lead to prohibited transactions, putting the company at risk and creating a conflict of interest for the advisor.

Reason 3: Cross-Purposes of 401(k) Advisors

Brokers, bankers, and insurance agents have a strong incentive to capture more of your employees’ dollars for every dollar in a 401(k) plan. This misalignment of goals means that your 401(k) advisor may not have your company’s best interests at heart. Their primary objective is to sell stocks and insurance, not necessarily to enhance employee morale or the company’s attractiveness to potential recruits.

Reason 4: Poor Investment Intelligence

Despite being in the investment business, broker advisors, bankers, and agents have a poor track record in setting up prudent investment menus for 401(k) plans. Often, they create plans with redundant or similar investment options, failing to activate exit strategies for older fund options.

Reason 5: Subpar Investment Performance

Over the last 26 years, advisors, bankers, and insurance agents have dominated the 401(k) industry. However, their results in guiding clients and employees have been far from impressive. Employees who have invested in the S&P 500 index have significantly outperformed the average stock fund investor in a 401(k). 

Reason 6: Inefficient Employee Meetings

Group enrollment meetings and annual pizza lunches, often organized by advisors, can be counterproductive. These lengthy sessions can leave employees more confused than informed, resulting in a loss of productivity and unnecessary expenses. Employee concerns are often left unaddressed.

Reason 7: Ignoring Financial Wellness

Financial stress is a pervasive issue that affects both employee well-being and your company’s bottom line. Unfortunately, many 401(k) advisors focus on employees who already have money to invest, neglecting the pressing issue of financial stress. This stress leads to increased healthcare costs, decreased productivity, and higher premiums. Your 401(k) advisor may not prioritize helping employees get out of debt and maximize productivity, which is essential for your company’s profitability.

In conclusion, it’s time to reevaluate your 401(k) advisor and consider alternatives that prioritize both the financial wellness of your employees and the financial health of your company. Addressing these seven key reasons can lead to a more engaged, productive, and financially secure workforce, benefitting both your employees and your business. Don’t settle for a salesperson when your company and employees deserve a trusted financial partner.

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