Are all 401(k) Administrators so Bad? - Fidelity Rant

Are all 401(k) Administrators so Bad? - Fidelity Rant
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#1

I have an employer sponsored 401k - I previously didn’t use an employer 401k for various reasons, but now it makes sense for me. Anyway, this is the first one I’ve had, it’s with Fidelity, and it’s abysmal. The investment selection is poor, the performance information is awful, they try to hide the returns, and provide “n/a” for cost basis.

Is this normal in 401k accounts? Is Fidelity just a poor provider? I’d expect to pay fees (which I am) because I understand and appreciate the regulatory burden on the companies in offering these accounts, but would also expect them to provide real information regarding performance (and at least give me the options to invest in their own ETFs). How is their performance information so much worse on these accounts than on their other account types?

The craziest part is that if I pay for their managed account services, they can invest in investments which are not options in the plan. I just can’t do that myself (even if I’m willing to pay the fee that the managed account costs).

ETA: I have a couple other accounts at Fidelity and have no issues; find them to be a top-tier retail brokerage firm. Not as good as Schwab, but still top tier, which is why I’m confused by this other ridiculousness.


#2

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#3

The investment options in any 401(k) are dictated by the sponsor (the employer). I have no personal experience with Fidelity as a 401(k) administrator, but plenty of users on other forums seem satisfied with them in that capacity; their employers have presumably negotiated better terms. Your employer might be using higher-fee investment options to offset plan administration costs.

See if there’s a brokerage option that will allow you to buy any ETFs, stocks, etc. (This is an option on some plans through Fidelity, Schwab, etc.)


#4

Yes, it’s dictated by your employer. Mine is at Fidelity and it’s great. I often get updates when they find equivalent funds with lower expense ratios, and they automatically do the fund change / transfer. I have a 3-fund Lazy Portfolio with extremely low expense ratios (~ 0.1%). Your best bet might be a target retirement fund if you have that option.

I thought there was some kind of lawsuit recently that basically said the employer has a fiduciary responsibility to plan participants, which forced employers to look for better funds. I don’t recall the details.

A relative has a SIMPLE IRA (not at Fidelity) that only offers 8 abysmal TransAmerica funds (front loaded, back loaded, with expense ratios in the ~1.2-2.4% range). The employer is a small business, so they probably don’t pay anything for the “service.” There’s a small employer match and it’s pre-tax, so it still makes sense and the relative will periodically transfer the money out after the minimum holding period (to avoid the back load).


#5

I see my cost basis in:

Investments -> Performance & Research -> Balance Overview

My Fidelity 401k plan has several Vanguard index funds with 0.035% - 0.07% expense ratios.


#6

It’s usually an artifact of the fact that Fidelity does all the 401k compliance stuff for free, and they get paid via selling higher-fee products.


#7

AVG fees for my 401k run by fidelity is .09%.

Sounds like you have a sub optimal set of funds :frowning:


#9

As others have already said, this is on your employer.

The 401(k) plan administrator is going to make sure they get paid and that comes through the 401(k)‘s investment funds’ expense ratios/loads (paid for by plan participants) and the plan’s administrative costs (paid for by the employer). As one goes down the other goes up.

10+ years ago I tried to bring a a 401(k) plan to a startup I worked at but the CEO wanted very minimal 401(k) administrative costs which lead to only high expense ratio/load funds being available. I contacted at least dozens agents trying to find something w/ low expense ratios (for me) and low administrative costs (to appease the CEO) but turned up nothing. This was 10+ years ago but I doubt anything has changed in this respect. The plan administrators still gotta/wanna get paid.


#10

I’ve had Fidelity for my employer 401k for something like 20 years. Its perfectly fine.
I’ve got 25 investment choices. Investment returns are like 2 clicks from login with 1, 3,5,10 year returns in % in a simple table. I pay no admin fees and the investment expense ratios are almost all 0.5-1% range.


#11

My university’s 403B plans are offered through a choice of Fidelity and TIAA-CREF. I compared expenses for the comparable fund options and found Fidelity to be lower across the board. So I’m all at Fidelity.

This was a few years ago so I should check again.


#12

As mentioned several times, this is a function of what your employer selected. Your employer put together a team of idiots to create what options you should have available.

If everyone who worked for such an employer would quit, and as the stated reason say “the 401k plan is terrible”, then perhaps we’d stop having poor 401ks.

Or even better, if we can decouple retirement accounts (and even health insurance) from employment, that would be an even better way to go about doing it.


#13

Simply said the only person who makes a nice profit from the 401k plans are the people running the 401k plan. I remember way back being told put the matching amount or XXX amount into your plan and after xxx years you will have a bunch of money… Not even close


#14

With the right match I’d say this is not true.

Even with a bad plan with 2% in fees yearly so long as you have a match you should participate

Example: for ever 1% you company matches 50% up to 3% total. You put 6% of your pay and the company matches with 3%.


#15

“With the right match” I could be ultra rich, from what I have seen is the fee’s for managing the 401k is what get these people rich, then add on top of that the fee’s for servicing the mutual funds, and ding ding ding even more money. If you quit your company they charge you a fee to service the 401k so you have to roll it over.


#16

That’s actually a good thing – I wish they let me roll it over without having me quit first!

If you don’t have a bunch of money after many years of contributions and matches, you must be doing something wrong.


#17

Totally.


#18

If you have a good 401k with a large employer, the institutional fees they can get in the 401k can be much better than anything you can get retail. So, in some cases, keeping money in a 401k is a good choice.


#19

You can’t get much better than the Fidelity index ETFs. Unless you consider an expense ratio of 0.04% to be much better than 0.06% :slight_smile:


#20

I do consider a 33% lower fee to be much better; though granted it won’t be too big a number in actual cost.

Still, for some non index funds, you can shave off pretty good amount from fees through institutional class shares. like .65 instead of .95.


#21

Yeah but are those funds worth the expense? My guess is they aren’t. I don’t see the point of investing in anything that costs > 0.1%.