What attorneys need to know about their firm 401(k) self-directed brokerage account

RJH Consulting

By: Ric Lager

Many law firm 401(k) retirement plans offer a self-directed brokerage account option. For those that do not, a simple request to the firm’s 401(k) provider can make this option available.
The self-directed 401(k) provides potential advantages for small and mid-size law firms. Lowering annual costs and improving annual investment returns are at the top of the list. 

Law firm 401(k) plans are “sold.” Law firms buy the 401(k) plan from a third-party retirement plan provider. One of the disadvantages is a limited choice of generic mutual fund options.
Worse, this limited menu of mutual funds includes higher annual fees. High annual fees limit investment performance, even with all-time high stock market valuations.

Small and mid-size law firms do not need to suffer from higher cost, limited option 401(k) plans. The self-directed brokerage account option (SDBA) can solve those firm 401(k) problems.

The self-directed brokerage account is often referred to as a brokerage window. This account opens an employee brokerage account within the existing 401(k) account. 

The 401(k) self-directed brokerage account is like any online brokerage account. A wider selection of publicly traded mutual funds and exchange-traded funds is available. 

Your firm's 401(k) provider can provide the important self-directed brokerage account details. You know the name; Schwab, Fidelity, Vanguard, EMPOWER, etc. 

If available, you will have one extra form to fill out and process. No big deal. Your efforts will be well worth your time.
Here are the necessary disclaimers for this audience of legal professionals.

Few attorneys have the knowledge or experience to self-directed their 401(k) account. And what about the time commitment? Self-directed 401(k) investing is best managed with a fiduciary-level investment advisor.

Legal professionals completely understand the fiduciary level of investment advice. Elevate your level of confidence working with an investment advisor who places your 401(k) interest ahead of their own. 
Your firm 401(k) account is near all-time high account values. Reconsider your “buy-and-hope” 401(k) investment management strategy.

You own default 401(k) mutual funds that have provided suboptimal investment returns. The annual costs to own those same mutual funds is three to four times higher than it should be. 

A self-directed 401(k) provides cheaper and better investment options. These options can preserve and grow your firm 401(k) retirement plan account over the next few years. You can open your largest retirement asset to an independent, third-party investment advisor.

Ric Lager is president of Lager & Company, Inc., a Registered Investment Advisory in Golden Valley, Minnesota. In 2021, Ric produced his second online CLE course titled “New CLE on the Cost of Your IRA 401(k) Problem.”  New CLE on the Cost of Your IRA 401(k) Problem – MLCE Blog (mcleblog.net)  Ric also maintains the Individual 401(k) Management page on LinkedIn for legal professionals.

Individual 401(k) Management: Company Page Admin | LinkedIn

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