Fidelity now offers an option for companies to let their employees put their 401k into ETFs. From a portfolio and diversification perspective this is a HUGE plus. Is there a fiduciary responsibility in light of that? The argument could be it’s easier to lose $. But everything in my 401k is down at least 30% except cash. With ETFs, some are down more, but many more are also up!
there is a fiduciary duty on all investments offered in a k plan All that is required is a prudent selection process, ability to adequately divesify among the options and ongoing due diligence
So wouldn’t adequately diversify = ETFs or Mutual Fund UNIVERSE not just 15 selections
Excellent LIII material. It is a delicate balance: too few choice, can’t provide enough diversification, too many choice, it confused sh*t out Joe six-pack.
If I recall correctly, technically under ERISA you basically only need to have 2 options, an equity and fixed income/and or cash. Given the PPA rules, there now has to be a suitable default fund as well. The fiduciary duty really deals with the monitoring of the particular investment options.
15+ options is overdoing it for most Plan Sponsors. I would offer: Stable Value / MM Intermediate Term Bond LCV S&P 500 Index LCG MCV MCG SCV SCG Foreign Emerging Real Estate Then target date or risk based funds. For those wanting to own ETF’s or stocks a self directed arrangment can be made so that they can go off the reservation.
I still think that’s not enough. The ETF option allows people flexibility… If you get a CFA but your company won’t trust you what does that say?
^Your company is CFAI.