When you make the decision to sponsor a retirement plan, you’re not just offering your employees another perk, like a gym membership or discounted auto insurance. You are partnering with them in providing for their future.

Every decision you make will not only impact them now but in their retirement as well. Decisions you make today will affect the kind of lifestyle they are able to have in their golden years.

Because of this, it’s really important that you make wise decisions and consider all possible ramifications throughout the process. One of the biggest decisions you will make as a plan sponsor is which investments to offer in your retirement plan.

Why Investment Choices Are Paramount

With the myriad of investment choices out there, trying to choose just a handful to offer can be overwhelming. There are so many different kinds and also so many that look just the same. But no two are exactly the same, so it is important to understand all of the specific details.

Compounding interest makes the little differences huge by the time a plan participant reaches retirement. A 1% difference in the rate of return, whether from superior performance or lower fees, may not sound like a lot. But for an employee who invests $1,000 a month for 40 years, the difference between a 5% return and a 6% return is $446,495. That little 1% is worth almost half a million dollars, which will make a significant difference in that employee’s quality of life during retirement.

How To Choose The Best Investments

Wise investment choices are vital to the success of your retirement plan and the security of your employees’ future. But how do you choose the best investments when they are so complex and confusing?

Partner with an experienced retirement plan advisor. Retirement plan advisors are specialists who know the ins-and-outs of investments and how their differences impact both retirement plans and their participants. A knowledgeable retirement plan advisor will take the time to understand your unique retirement plan and its participants and help you choose the investments that best answer your specific needs.

Following Up On Your Investments

Your fiduciary duty goes beyond just choosing investment options, though. Investment options are not something that you can just set and leave without any follow-up. Plan sponsors are under a legal obligation to monitor the performance and fees of their investments continuously.

If you don’t have a plan in place to monitor your investments, fees could be raised to an unreasonable level and you could be found in breach of your fiduciary duty. Or an investment could stop performing well and it could cost your plan participants thousands of dollars. You sponsor a retirement plan because you want to take care of your employees and to do that you must monitor your investments on an ongoing basis.

The easiest way to monitor your investments effectively is to delegate it to a retirement plan advisor. Working with different investments day-in and day-out, a retirement plan advisor will be much more efficient in detecting changes to the investments and understanding the implications. Partnering with an investment specialist will free up your Human Resources department to do what they specialize in while giving you better quality investment monitoring.

Choosing A Retirement Plan Advisor

Clearly, working with a retirement plan advisor can improve your plan and make your life easier as a plan sponsor. But you need to be careful what kind of advisor you choose to work with. Many advisors have inherent conflicts of interest because of the kind of business they are in.

Some advisors will only recommend funds from the specific company they work for. When you work with them, you may get the best investments their company has to offer, but they won’t necessarily be the best investments available. Then, if those investments fail to perform or raise their fees, they won’t have anything better to offer you because they can’t go outside the walls of their own company.

As a Registered Investment Advisor, Beacon Pointe is held to a fiduciary standard to always act in the best interest of our client, putting you and your retirement plan first. We are not tied to any specific company, so we have the full breadth of investment options available to us. If you need help choosing investments for your retirement plan or monitoring the ones you already have, give our office a call at (949) 718-1600 or email us at info@beaconpointe.com today.

Important Disclosure: This content is for informational purposes only. Opinions expressed herein are subject to change without notice. Beacon Pointe has exercised all reasonable professional care in preparing this information. Some information may have been obtained from third-party sources we believe to be reliable; however, Beacon Pointe has not independently verified, or attested to, the accuracy or authenticity of the information. Nothing contained herein should be construed or relied upon as investment, legal or tax advice. Only private legal counsel may recommend the application of this general information to any particular situation or prepare an instrument chosen to implement the design discussed herein. An investor should consult with their financial professional before making any investment decisions.

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