401k Plans - Why Fees Matter

Just read a very interesting article about the structure of 401k fees and the "hidden" effect they can have on your ultimate investment performance. While this article is a bit academic in nature, there are many relevant takeaways that apply to nearly everyone who participates in, or sponsors a retirement plan:

• Over a 30-year career, paying an additional fee of .50% can reduce the purchasing
  power of savings at the time of retirement by one-eighth.
• Complete disclosure of fees help employers fulfill their fiduciary responsibility to ensure that the 401k plan they sponsor does not impose unreasonable costs for their employees.
• The Department of Labor is revising regulations to require sponsors to report the fees of their 401k plans more clearly to their employees.

As I have noted many times before, one of the keys to a successful 401k plan is the cost of the plan itself. These costs come in many forms, and it is important that you are able to identify as many of them as possible. At Symphony, all of the fees and costs are completely disclosed and transparent. Can your current provider make the same claim?

5 Things to Consider When Selecting an Investment Advisor

Our current market crisis has clarified the need for investors to work with trusted investment professionals. Obviously the Madoff Scandal has demonstrated how easily fortunes can be lost in illegal investment schemes. However, Ponzi Schemes are far less common than unscrupulous advisors who overcharge clients or recommend products that are inappropriate. I’ve run into many advisors over the years that cared little about their client’s best interests.

When selecting an advisor you should consider five things:

1. Experience - Select an advisor with who has been in the business for a while. The passage of time tends to eliminate many of the incompetents. As the industry undergoes its normal ebbs and flows, those financial professionals who don’t excel are separated out, either voluntarily or otherwise. When I was new I didn’t know what I didn’t know. New advisors often make mistakes with new clients. You are probably safe with anyone with at least seven years of verifiable experience as a financial advisor. Since a market cycle is typically five years, seven years is enough time for them to have experience both up and down markets.
2. Philosophy - Select an advisor with a compatible investment philosophy. Try to choose an advisor whose personal portfolio strategy mirrors your own. If you are a conservative investors who prefers low risk, don’t work with an investment manager who frequently recommends high flying stocks. Your advisors bias will always be reflected in the advice you are given.
3. Compensation – Get to know how your advisor is paid. The payment to your advisor must avoid conflict-of-interest. You don’t want an advisor who profits by putting you in or taking you out of an investment. The best situation is where advisor and client profit or lose together. Next best is an advisor, paid to provide advice, with no financial stake in the decision the client makes. Always ask how they are paid.
4. Expertise - Does the financial advisor handle the services you need? Consider whether you need individual financial planning, group planning, or portfolio management. Will you need help with securities, or simply need someone to give tax advice? Is the planner simply an insurance salesman? Find the consultant that provides the services that you need.
5. Team – Who is part of your advisors team? Is he a solo-practitioner, or does he work with other specialists that can strategize on the various issues? It’s rare you will find a single person with all of the answers, by working with a team you get the combined experience of the group.

There are many charming investment salespersons out there, ready and willing to sell their services to you. Do your homework. Approach every financial advisor with a critical eye. After you doctor, your investment advisor might be your most important relationship.

Are Your Assets Safe?

In light of several recent investment scandals, including Bernard Madoff and his $50 Billion “Ponzi” scheme, we want to assure you that we will NEVER place you or your assets in such a position. We hope the following questions and answers put your mind at ease. Additionally, you should confirm that ALL of your advisors could answer these questions in a similar manner.

Where Is My Money? As a client of Symphony Investment Group we have “limited trading authorization”. What this means is that your money stays in your name. Further, it is “custodied”, or actually held, at one of our trusted custodians (Fidelity, TD Ameritrade, Schwab). In addition, you never write a check to Symphony to deposit your funds. Instead, your check is written to the custodian.

What Is My Account Invested In? Symphony Investment Group believes in “full transparency”. You will know, up front, exactly what investments your account holds. We only invest in regulated, publicly traded securities such as common stock, ETFs and mutual funds. All of these are highly transparent and highly regulated.

What Is The Value of My Account? Since your account is actually held by a national custodian, such as Fidelity, you can simply access their website, or the link on our website, 24 hours a day, 7 days a week. Of course, you can always call our toll-free number for any account information.

Can I Get My Money Out? Investors in “hedge funds”, like those managed by Madoff, often are told they can only withdraw assets at specific times, and many have a “lockout” period of 1 year or more when first invested! As written in our contract, Symphony Investment Group will never charge you for withdrawing your money, nor hold you to any time commitment.