Do you know how much money you can save through investment monitoring?
It’s a fact that 87% of all mutual funds don’t outperform their benchmark, which means people are paying for actively managed mutual funds that cost 5x to 10x as much as an index fund, yet they’re not delivering results.
I recently did some investment monitoring on a prospective client’s $100 million retirement plan and found out that the average expense ratio was quite high for a plan of that size. After digging a little deeper, I learned that the plan was with a large insurance company. I wasn’t shocked to find out that the default investment option, or the target date funds offered in this plan, were proprietary funds offered by the insurance company. There were 75 basis points (or an expense ratio of 0.75%), which was quite high for a $100 million plan.
I then did a side-by-side comparison using an investment monitoring tool and found out that we could save this client over $500,000 in investment fees and advisor compensation simply by adjusting the investment options in the plan.
Additionally, the historical numbers tell us we would have outperformed the existing fund lineup over the last 10-, five-, three-, and one-year periods, as well as year to date.
So there you have it: A better performance and a dramatically lower fee would save this client over $500,000 in investment fees because they’re buying funds that can’t outperform their benchmark.
If you’d like to know more about the investment monitoring tool we use, watch this video.
If you want to follow up about this topic, visit Retirementcfo.com or Selectretirementplans.com. I’d love to do a plan comparison for you and compare your investment lineup with what we’re doing for our clients. I’m confident we’ll be able to save you money.
As always, if you have any other questions, feel free to reach out to me. I’d love to help you.