Frequently Asked Questions (FAQs)

Organizations with SDBAs

Is this a replacement for our current 401(k) plan?

No. 401k Educate builds upon your current retirement plan by providing professional money manager options that your employees can choose from. All you need is a 401(k) plan that allows self-directed brokerage accounts (SDBAs) providing the ability for third-parties to trade on your employee’s behalf.

Does 401k Educate charge anything to provide this service?

No. Our on-site educational workshops are complimentary, and we provide each employee the resources to better manage their own retirement plans. Additionally, we provide an option to assist your employees with their retirement planning as a fiduciary. Like any advisor, we then gain our compensation in the form of advisory fees within their retirement plan savings. No fees will ever be paid directly to 401k Educate by your company or your employees.

Will this interfere in any way with our current 401(k) provider?

No. The services we provide only builds upon your current 401(k) plan. Employees will have the ability to better plan for their retirement goals through their 401(k)s by taking advantage of our professional money management services and/or find better diversification with a self-directed brokerage option available to them.

Why do we need 401k Educate?

To maximize your investment. As an organization, you put time and effort into choosing and setting up your 401(k) retirement plan in hopes that your employees would get the most benefit out of it. 401k Educate works with your employees to educate them on how to do this ensuring you maximize the retirement benefit you worked so hard to set up.

How do I know if we would benefit from this?

Have you ever had an employee mention they have no idea what to do when it comes to their 401(k) investments? Are they note getting regular specific instructions from your current 401(k) provider? Would you like to provide a no-cost, highly-valued investment for your employees? If the answer is “yes” to any of these, then let us start the conversation and see how we can help you!

Organizations without SDBAs

What if our plan does not offer a self-directed brokerage account?

SDBAs are a feature that can be easily added to any 401k plan with very minimal costs, most of which can be absorbed solely by employees that wish to participate in this benefit. This feature can generally be added at any time of the year not requiring any open enroll periods restrictions.

Why should we add a self-directed brokerage account to our current 401k plan?

You may already have a fantastic selection of investments that you provide to your employees, but no investment selection offered is going to provide an investment that adequately meets all your employees needs for all time periods specific to each employee or to the market cycle in general. Providing a self-directed brokerage account will provide the added diversity to ensure that no need your employees might have will go unmet because you are giving them access to almost every investment possible within a 401k. We at 401k Educate also realize that by giving your employees access to so many possibilities that they could create more problems than benefits if done improperly. This is why we put a heavy emphasis during our workshops to make sure no employee is doing this on their own unless they are fully confident in their own abilities. Some companies will take this process a step further and only allow up to 25%, 50%, 75%, or the full 100% of their 401k to be able to use the self-directed brokerage account.

Also, important to note that although adding a self-directed brokerage account will not relieve your fiduciary responsibility of the 401k investment selection process, it will greatly enhance your 401k summary plan statement that you have taken ever possible step in providing your employees not only with a greater amount of diversity for their retirement plan, but also the added steps of fully educating your employees on the risk and possibilities available to them within their 401k plan by bringing in 401k Educate to present workshops.

Will our company be responsible for investments made by our employees within self-directed brokerage accounts?

No. All investment decisions made by your employees are solely the employees’ responsibility. Regardless of the custodian you select to handle the self-directed brokerage account (many can use the same custodian as their 401k), your employee will be required to sign an agreement when setting up the self-directed brokerage account that they are fully responsible for any investments chosen. This is the main reason 401k Educate really emphasizes the dangers and pitfalls of an individual making these types of decisions on their own and the importance of not moving forward without professional financial assistance.

Questions for Individual Investors

Why can’t I just ask my personal financial advisor for 401(k) investment advice?

Technically you can, but there are two main factors why your financial professional will not assist with your 401(k). First, because your individual financial professional is not likely the provider of your 401(k) plan, they are probably unwilling or unlikely to give advice that they are not compensated for providing.

Second, because there is no other form of investment that is more protected and scrutinized than a 401(k) retirement plan, many advisors shy away from giving advice. 401(k)s are protected by the Employee Retirement Income Security Act (ERISA) of 1974 and governed by three separate entities which include Financial Industry Regulatory Authority (FINRA), the US Securities Exchange Commission (SEC), and the Department of Labor (DOL). In May of 2005, ERISA laws were made even more stringent with the new requirement of being a fiduciary to provide direct advise to participants.

This is not to say some advisors will not give advice, but it usually comes in the form of guided direction and may sound something like this, “I can’t give you any direct advice on your 401(k) plan, but given the options you have available, I would likely be investing in…”

How is 401k Educate able to provide regular advice on 401(k) investing?

All 401k Educate personnel have taken the necessary steps to meet the ERISA 401(k) retirement plan guidelines of a fiduciary by becoming Investment Advisor Representatives. This provides us the ability to directly assist active 401(k) participants on a continuous basis to help them more effectively reach their retirement planning goals.

If I work with 401k Educate, does that mean I have to give up my current advisor?

No, not at all. We can work hand in hand with other financial professionals to ensure you are getting adequate diversity to your overall investment portfolio. As a fiduciary, 401k Educate will ask to have regular visibility into all of your investment assets to make sure you are continuing to meet your overall investment goals. While you are not required to provide this information, as a fiduciary we are obligated to notify you that we are only able to provide educational assistance for assets we have access to. We are willing to assist you with however little or how much you feel comfortable providing us with.

What does it mean working with a fiduciary?

As a fiduciary, we provide you with the advice we would personally take or give to those closest to us. It is our duty to make sure your needs come before anyone else’s—including our own. Because of this, we are precluded from providing specific investment advice solely for our personal financial gains. Instead, our advice is focused on your goals and not our commissions. As an independent firm, we do not have any requirements to promote and sell any specific products for a vendor we would be associated with.

What value do you bring to your clients as a fiduciary?

We put an emphasis on educating clients on the pros and cons of their investments. Every investment comes with risks and it is important investors know what those are before investing. These risks will range from purchasing power risk to market risk (see below for definition). The value of working with a fiduciary is having someone that can assist you with finding a proper blend of investment selections to help satisfy your financial objectives within your risk tolerances.

Purchasing Power Risk – Picking an investment that minimizes the risk of loss of principal investment at the risk of missing out on higher potential gains and possibly even losing value due to inflation.

Market Risk – The potential to lose principal investment for the potential of gaining higher potential returns.