Advisers need to brace themselves for more changes in and scrutiny of 401(k) plans, particularly as investors have witnessed their nest eggs dwindle dramatically in recent weeks, according to one retirement expert.
Advisers need to brace themselves for more changes in and scrutiny of 401(k) plans, particularly as investors have witnessed their nest eggs dwindle dramatically in recent weeks, according to one retirement expert.
“What a lot of people are feeling today borders on depression,” said Fred Reish, a lawyer and managing director at Reish Luftman Reicher & Cohen, a Los Angeles law firm.
“Something’s wrong with the system and needs to be fixed,” he said.
Mr. Reish was today’s keynote speaker at the Center for Due Diligence’s 2008 conference in Scottsdale, Ariz., titled: “An Industry in Transition: Old model is mature, new one is an infant.”
The Center for Due Diligence, a Western Springs, Ill., independent-research organization that specializes in 401(k) programs for advisers, hosts this annual conference.
Mr. Reish pointed out that advisers will get additional scrutiny on fees in 401(k) plans and investment choices.
“Almost all 401(k) participants are frightened and worried about their retirement picture,” he said.
“I’ve never heard 401(k) plans mentioned as much in an election as this one.”
Advisers need to steer employers in the right direction by helping them choose funds that will be easier for employees to use, such as target date funds, Mr. Reish said, and it’s also important that advisers help get more participants into 401(k) plans and ensure that they’re saving at a rate of 14% annually.
He pointed out that most studies show that participants are contributing only about 7% annually to their retirement accounts.
This current crisis is highlighting the worries and fears that Americans haven’t saved enough for retirement, and Mr. Reish said that advisers who work with employers need to coach them in ways to improve their retirement plans.
