At Cerity Partners, our mission is to provide exceptional financial advice and wealth management service. Retirement assets, particularly 401(k) plans, are crucial to our clients’ wealth strategies. Historically, managing 401(k) assets within a broader financial plan has been cumbersome due to limited advisor access to these trust-held accounts. Advisors traditionally reviewed and suggested strategies for 401(k) plans, leaving implementation to clients.

The introduction of the Pontera platform has transformed this dynamic, enabling Cerity Partners advisors to view, analyze, and rebalance their clients’ 401(k) assets as an integrated part of comprehensive client portfolios. This secure, client-permissioned capability facilitates proactive, holistic portfolio management.

 Key Considerations in 401(k) Plan Review

  • Asset Allocation: Evaluating the diversification and suitability of a client’s 401(k) investments is essential. This evaluation includes assessing the fit of balanced and target-date funds within the client’s broader asset allocation strategy as well as the potential integration of standalone options, like U.S. Large Cap equities or core investment-grade bond funds. The goal is a balanced asset mix aligned with the client’s financial goals and risk tolerance.
  • Costs: We can scrutinize the expense ratios of 401(k) investment options, comparing them against broader market standards to ensure cost-effectiveness. Lower expense ratios relative to the quality of the strategy can significantly enhance the long-term growth potential of the assets.
  • Quality of Investment Options: Performing a thorough review of the plan’s investment options identifies top quality choices, ensuring the selections enhance the overall portfolio. The review should encompass passively managed options, like S&P 500 index funds, which can efficiently align with U.S. equity allocations, and active managers across all asset classes.

    Additional Evaluative Criteria for Mutual Funds

    • Performance History: Assessing a fund’s historical performance provides insights into its management across varying market conditions.
    • Manager Tenure and Experience: The experience of fund managers, especially through different market cycles, is crucial for expected performance reliability.
    • Investment Style and Asset Allocation: Analyzing the fund’s approach and its asset distribution helps the advisor assess its compatibility with the client’s investment goals.
    • Risk Metrics: Metrics such as standard deviation, Sharpe ratio, and beta are vital for understanding the fund’s risk-adjusted performance.
    • Turnover Rate: Consider the impact of a fund’s turnover rate on trading costs and net performance, particularly as high turnover might indicate cost inefficiencies. Fund Size: Evaluate scalability issues of large funds and the resource adequacy of small funds to ensure optimal fund performance.

    Self-Directed Brokerage Accounts (SDBA)

    For clients with specific investment goals or who desire more control over their retirement savings, consider the availability of SDBAs. SDBAs offer access to a broader range of investment options than typically available in standard plans.

    Other Strategic Considerations

    • In-Service Distributions to IRAs: Evaluate the eligibility and strategic value of rolling over 401(k) funds to an IRA to enhance investment flexibility and alignment with retirement goals.
    • Pre-tax vs. Roth Contributions: To choose between these options, analyze current and expected future tax scenarios, financial flexibility, and estate planning implications.

    Conclusion

    Our integration of Pontera’s technology signifies a significant advancement in the management of high-net-worth clients’ 401(k) plans. This partnership enhances our capacity to manage these accounts effectively as integral components of a comprehensive financial strategy. By offering tailored solutions that consider asset allocation, cost efficiency, and high-quality investment options, we ensure each decision supports our clients’ overall wealth accumulation and preservation goals.

    The true value of our service extends beyond investment management by providing strategic financial planning, tax optimization, risk management, and estate planning, all crucial for high-net-worth individuals who aim to grow, protect, and strategically distribute their wealth.

    Through this integrated approach, Cerity Partners continues to provide not only financial advice, but a true partnership aimed at realizing the long-term financial security and aspirations of our clients.

    Please read important disclosures here.