Why Companies Change Investment Fund Advisors
Setting up investment funds and retirement accounts for employees is a complicated matter, and few companies have the resources available to handle the process internally. As a result, companies typically hire outside financial advisers to set up and administer their 401k plans and other employee retirement accounts. While every company hopes to get the best service from the first adviser they choose, a number of factors can cause the company to look elsewhere and change investment firms.
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High Costs
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High fees are a reason companies decide to abandon their current investment fund advisers and seek out new ones. These fees can include the money charged to the company to manage the 401k plan, SIMPLE IRA or other retirement account. The fees charged by different plan administrators can vary considerably, and those high fees can add significantly to the bottom line over time. In addition to the fees charged to the company itself, employers also need to look at the costs passed on to their employees. Many employees complain of high fees in their 401k and other retirement funds, and savvy companies respond to those complaints by looking for lower cost administrators.
Poor Service
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It is important for an investment fund adviser to be responsive to the needs of their customers. Companies who find that their phone calls and inquiries go unanswered are more likely to seek a new firm. It is a good idea for any company that uses a fund adviser to assess how the firm responds to complaints and inquiries. If those concerns are not addressed promptly, that should be a warning sign.
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Limited Investment Options
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One of the most common complaints among 401k participants is that their investment choices are limited. Companies who find that the fund choices within their 401k plans are simply not sufficient might change investment fund advisers in order to widen the number of investment options and give workers a better selection for their retirement money. Companies should look for an investment advisory firm that can provide several stock mutual funds, including a low-cost index fund option, as well as both government and corporate bond funds, an international investing option and a stable value fund for protection of principal.
Paperwork Hassles
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Setting up an investment fund for employees requires a great deal of paperwork, but some investment fund advisers are better at helping firms handle that mountain of paperwork. Companies that receive help sorting through the tax and record-keeping paperwork are less likely to switch advisers than those who receive little or no help. When choosing an investment adviser, it is always a good idea for company managers to assess the level of support they are likely to receive from each company they interview. External factors like the size of the firm and how many clients they currently serve can provide important clues about the expected level of support.
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