Oh the games the competition plays . . . .

Having been in the retirement consulting business for over 20 years we have seen the majority of the smoke and mirrors that come into play when deciding on a 401(k) plan. Generally, you need to watch out for a few things and we will try and outline them here.

One: Be careful of broker-sold retirement plans which initially state low recordkeeping fees. Insurance companies and brokerage firms generally have higher internal management fees in the investments that they offer which affects your return. Since you cannot see them, you really have no idea how much you are paying in investment management fees. We have seen insurance company annuities with as much as 3% internal management fees. Keep in mind the broker is not working for free, he or she is getting paid somewhere.

Two: Request a prospectus on each fund or at least the investments symbol. This way you can look the fund up on popular financial sites such as Yahoo! Finance and see what the expense ratios and long term investment track records are. If the fund does not have a symbol, it is most likely an insurance company annuity that is padded with extra fees like a mortality expense in addition to the investment expenses. If the insurance company refuses to provide you with services agreement, it's probably because they don't want you to find out about the hidden fees.

Three: Be careful of the cloned mutual funds. For example, Insurance company A states that they have a clone of a popular good performing fund, except that it does not have the same symbol. Here's what they do: they form a separate account which invests in the other fund. Both accounts have fees, so you are paying an extra layer of fees. Why not just buy the well-performing fund directly!

Four: Watch out for deferred sales charges. These are charges that are tacked on if you leave the fund provider.

These are just a few of the things to watch out for. At Wellington, we do not receive any compensation from any of the investment funds, so you know that we do not have a conflict of interest. If you want the funds that have the top performing past performance, their is a good probabability we have access to them. Just ask!

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