A New Service for Employer Retirement Plans

Clients often ask whether Provident can manage the assets in their 401(k) or 403(b) employer-sponsored retirement plans. Until recently, our answer was “no” because we could not trade client accounts custodied outside of Schwab. Assets left behind in a previous employer’s plan could potentially be rolled over into an IRA at Schwab which we could manage. However, with respect to assets in the current employer’s plan the best we could do was to evaluate options and offer a complimentary recommendation for the client to consider. Whether the client acted on those recommendations or revisited the problem in the future as life circumstances changed was beyond our control.

A new technology provider, Pontera, now allows us to trade accounts in employer plans, turning that “no” into a “yes”. Pontera integrates with our reporting system, Tamarac, and allows us to show you a combined portfolio report, including current holdings and historical performance for assets custodied at Schwab alongside those in your employer plan.

Some clients will find this valuable. We can help organize your complete portfolio, manage it as a coherent whole, and keep it invested consistently. It is common for people to neglect the assets in their employer plans, even though working people frequently accumulate most of their investable assets in these plans. People often feel great uncertainty selecting an investment allocation, and then they avoid revisiting that decision for years, sometimes for their entire careers. The investment election you make in your first year with your employer probably won’t still be optimal ten years later. Markets move. Life happens. The menu of plan options changes as well. For example, mutual funds are frequently shut down and have their assets absorbed by an ostensibly similar fund. Suddenly you have money invested in a fund you never even chose.

Employer plans vary, and some offer broader menus than others. In most cases, the menu of investments we can choose from will be limited by the plan’s options. There are exceptions. We can buy and sell individual securities in plans that employ Fidelity BrokerageLink or Schwab Personal Choice Retirement Account (PCRA).

The downside of hiring Provident as a manager is the drag from applying our fee schedule to your employer-sponsored account. We might be able to improve your outcomes enough to more than earn that fee back, but there is no guarantee on this front. We believe some clients will still consider the cost worthwhile.

One of the benefits will be helping more prospective clients achieve our $500,000 minimum. It is unusual for working people to accumulate that level of investable assets outside of an employer account, but by adding the assets in their employer-sponsored plans they may be able to meet the threshold. We sometimes win new clients who have been planning for years to hire us for but whose investable assets were in their current employer’s plan.

Of course, we are always thankful for referrals if you know anybody who could benefit from this service as well. One obstacle to referral business in this industry is the potentially awkward problem of whether a friend or family member can meet our relatively high minimum. Again, the ability to manage employer accounts makes this minimum more achievable. As an aside, we often take calls from potential prospects who turn out not to meet our minimum, and our typical response is to discuss their current means and future goals to see whether their expectations are reasonable. A friendly consultation helps us evaluate whether they could realistically become a prospect for us in the future while also lending our expertise and perspective to consider.

If you are curious about this new option, we would be very happy to discuss it with you personally. Integrating the management of your employer-sponsored plan along with your other assets could help your portfolio better support your needs and goals over the rest of your life. Retirement may be years in the future, but preparing for it starts today.

Miles Putnam, CFA