What’s the Role of a Financial Advisor?
I’m Erik Wolfers. I’m the managing member of First & Main Financial. We’ve been helping individuals with their finances since 2001. Today I’m going to talk a little bit about 401K plans. In the nearly two decades that I’ve been advising individuals, I’ve looked at hundreds of 401K plans. Most 401K plans, or many 401k plans have actively managed mutual funds inside of them and the advisor on these plans then has the job of working with plan sponsors to make sure that the funds are still good and relevant from one year to the next. Sometimes a fun underperforms but then it turns around, so that’s a challenge to try to guess if a underperforming fund is going to continue to do so or is going to turn around and perform as it has in the past; if it has a long track record.
There are many 401K plans that have passive investment vehicles or index funds. With an index fund you should expect a certain return over a long period of time, and then what does the advisor do on these plans?
The way we do 401k plans, as the advisor, we spend our time consulting with the participants with the plan. The 401k industry provides a lot of self-help, but in my experience, some time and individual attention with the participant of the plan can potentially have an enormous impact on the outcome of their wealth over time, over several decades.
Sometimes, people have limited experience with investing. They don’t know how much to save, they don’t know what the proper asset allocation is and they don’t necessarily trust the online tools—and they shouldn’t necessarily either because the advice is generally generic.
So, that’s the way we do 401k plans is to actually advise the participants of the plan and it has a big positive impact, generally, for the people that seek our advice in the plans. It’s a better way of doing things.
If you are looking for some financial guidance; whether for a one time financial plan or continuing advice on your investments, we invite you to meet with a First & Main Financial planner for a free consultation. We would be more than happy to sit down with you, assess your situation and review our services to help navigate your financial future.
