Is Professional 401(k) Account Management Right for Me?
There’s a lot of talk right now about professional 401(k) account management after the recent info on the Blooom shutdown – how it’s left investors in the dark.
Professional 401(k) account management has been in the news lately with Blooom shutting down services effective November 2022.
The direct-to-consumer retirement robo-adviser platform with more than $5 billion in assets and 150,000 accounts ceased serving customers. And investors, rightfully so, are not happy – especially since they were alerted days before and via email.
While we’re sorry for these investors, the bright side is that the headlines and forum chats have also renewed a curiosity and interest in professional 401(k) account management.
If you have never been taught how to choose your own investments or simply don’t have the time to do it, having someone to help manage your 401(k) may have big advantages.
However, not all professional 401(k) management companies are created equal. In this post, we hope to clarify the types and also show how having someone manage your 401(k) may help you have more money during retirement.
Robo Advisors vs. Personalized Account Management
It’s important to understand why not all professional 401(k) account management services are created equal.
A robo advisor managed accounts is where an investment service selects a group of funds and packages them in an investment portfolio for you.
There is little personalization, many only rebalance annually, and personal risk tolerance is rarely considered. Funds are often set up so they lessen equity exposure as you age.
Before it shut down services, this is what Blooom did. They prioritized index funds, with occasional use of actively managed funds. Their robo-advisors automatically rebalanced accounts as necessary, so if the allocation moved too far from its target, the robo advisor bought or sold investments to bring allocations back in line.¹
Compare that with a personalized personalized professional managed account where your 401(k) is personally managed by a person or team.
Personalization occurs using the investment options that are offered, and a personalized strategy – tailored to your unique situation and risk tolerance – is designed using the full menu of investment options in your 401(k) plan.
When you have professionals personally managing your 401(k), like we do at 401(k) Maneuver, the focus is on the outcome, not a cookie-cutter approach to investing based on your retirement date.
We believe there’s no such thing as a one-size-fits-all approach to saving for retirement.
We are not robo advisors – we are real people making decisions on your behalf. And, as a fiduciary, we’re obligated to act in your best interest with the goal to improve your account performance so you have more money during retirement.
How Professional Account Management May Help Your 401(k) Performance over Time
In addition to managing your investments and quarterly rebalancing your 401(k), personalized account management may also help you stay on course to meet your retirement goals. Here’s how…
#1 May Help You Keep More
Professional 401(k) management help has been shown to increase 401(k) investors’ returns.
In a 2019 study titled Advisor’s Alpha, The Vanguard Fund Group, Inc., reported a 3% average increase in the value of portfolios of clients who have their accounts professionally managed.²
Aon Hewitt and Financial Engines conducted a study from 2006 to 2012 comparing the returns of investors who sought help in the form of online sources or managed accounts to those who managed their 401(k)s themselves.
The study examined the 401(k) investing behavior of 723,000 workers at 14 large U.S. employers. It showed that investors who received professionally managed help earned higher median annual returns than those who invested alone.
In fact, participants who had their assets managed by professionals saw an average of 3.32% (net of fees) more in returns annually than those who managed their own accounts.³
The study revealed, “If two participants—one using Help and one not using Help—both invest $10,000 at age 45, assuming both participants receive the median returns identified in the report, the Help participant could have 79 percent more wealth at age 65 ($58,700) than the Non-Help participant ($32,800).”⁴
Don’t think 3% can make a significant difference come retirement? Check out the potential of adding 3% more to your 401(k) over time.
#2 May Help Reduce Fees
Fees hidden within your 401(k) can take away from your investment returns and leave you with less money in retirement than you planned.
Yet, 92% of 401(k) investors have no idea what they are paying in fees.⁵
This may be, in part, because figuring out what your fees are is often easier said than done.
Personalized professional 401(k) account management can help you identify the fees inside your 401(k) and help you know if you’re paying too much.
#3 May Save You from Acting on Emotion
During volatile markets like we’re seeing right now, emotion can easily get the best of us and cause us to make poor decisions in the heat of the moment.
Making investment decisions based on a reaction to a headline may negatively impact your retirement savings.
Professional 401(k) management helps take the emotion out of financial decisions – especially during volatile markets and times of uncertainty like we’re in right now.
In addition to managing your investments and quarterly rebalancing your 401(k), professional management may help you stay on course to meet your retirement goals.
You have someone there to help wade through rough markets and make decisions based on data and trends, not fear and worry.
With expert advice, you are more likely to make better financial decisions. And, thus, potentially earn more to boost retirement savings.
#4 May Save You Time
Managing your 401(k) takes time. And to do it correctly, you need the knowledge and skill set required.
If you don’t have the time to learn how to properly rebalance your 401(k), professional account management will save you time and effort. And allow you to focus on other things in your life knowing your account is taken care of.
Grow and Protect Your 401(k)
401(k) Maneuver provides professional account management to help you grow and protect your 401(k) account.
Our goal is to increase your account performance over time, manage downside risk to minimize losses, and reduce fees that harm your account performance.
Our done-for-you, virtual service allows you to keep your 401(k) right where it is while we review and rebalance your account based on your risk tolerance and current market conditions
Book a complimentary 15-minute 401(k) Strategy Session with one of our advisors today.
- Over 90% of Americans make the 401(k) Mistake, Maurie Backman, Motley Fool