How To Invest Like A Professional

Here are five smart moves you should take today:

1. Keep it simple and profitable: Use no load, low cost, index funds for your plan’s core mix of investments.
2. Set up self-directed accounts for employees (participants) who think they can pick managed funds and/or asset-allocation, target-date, lifecycle, lifestyle, and balanced funds that will beat a core mix of index funds in performance. Warning to employees: If you have never picked managed funds that beat index funds in performance–long term–what makes you think you can do it going forward?
3. Consider the possibility that you are paying more than you should for services such as recordkeeping and administration, consulting, and investment advice. For instance, what does added value really mean? The bottom line is how much money YOU earn on your investments after you pay for everything. That is why it makes sense to compare your ROI (Return on Investment) to an appropriate benchmark.
4. If you pay for an asset-allocation and re-balancing program, stop it. Instead, use the classic asset-allocation and re-balancing model and set it up on auto-pilot. It is free and it works as well as the most sophisticated asset-allocation and re-balancing programs.
5. Stop wasting your money. Yes, you can save at least ten percent of all you earn. Savers have a mind-set that makes it hard to let go of their money; they study ways to cut their living expenses. Spenders have a mind-set that makes it hard to hold onto their money. Before you make a purchase, you should ask this question: Whose plan do I want to contribute my hard-earned money to? Can you feel the pain of throwing your money away? Can you feel the joy of looking at your statement and seeing more money in your 401(k) or 403(b) plan than you thought was possible for you to save?

Fall in love with cutting costs and improving investment performance, not with service providers who you may think are the best, brightest, and most popular.

Best wishes,

Your teacher, Frank Cirullo

The easy way to understand your 401k or 403b plan is by seeing–not thinking.

Your vantage point will determine whether you set up a truly low cost plan or keep your high cost plan that only appears to be low cost.

For instance, if you only look at high cost plans that create the illusion of being low cost, your plan will almost look normal. But once someone shows you a truly low cost plan and you understand what makes it low cost, you won’t touch a high cost plan again, ever.  With that insight, you will be able to spot the  high cost plans, instantly. 

To learn the truth about your 401k or 403b plan the easy way, you should study the six questions below. After you read the final question, you should be able to visualize what a truly low cost plan looks like:

1. For a core mix of investments, does your plan use managed funds and/or asset-allocation, lifecycle, lifestyle, and balanced funds or index funds? (If your core mix of investments is managed funds, you are experimenting with your hard-earned money, because you don’t have at least a ten year track record of picking a diversified mix of managed funds that beat a diversified mix of index funds in performance. If your mix of managed investments underperform index funds, will you have more money or less? Less, right?)
2. In addition to your plan’s core mix of investments, do employees have the option to set up a self-directed account? (Employees who don’t have a track record of picking managed funds that beat index funds can try it if they have a self-directed account).
3. For recordkeeping and administration, do you pay not more than $25.00, per eligible employee, per year (remember, no hidden or camouflaged costs are allowed)? (The less you pay for recordkeeping and admintration the more of your own money you keep).
4. Did you hire a consultant who has never set up a truly low cost plan? (Always ask for a consultant’s track record so that you know his or her history of setting up low cost plans. First, you need to learn what a truly low cost plan looks like so that you know which consultants actually know how to set up a low cost plan).
5. Did you hire an investment adviser who does not have a long term track record (ten years or more) of picking managed funds that beat a diversified, core, mix of no load, low cost index funds in performance? (Always ask for a long term track record of ten years or more.  You may learn that not one investment adviser has a long term track record of picking managed funds and/or asset-allocation, lifecycle, lifestyle, and balanced funds that beat a diversified, core, mix of no load, low cost index funds in performance). 
6. Does the co-ficuciary for your plan sell investments and/or other services such as recordkeeping and administration, consulting, or investment advice to your plan? (Why would you allow a co-fiduciary to sell investments and/or services to your plan?  Just think about it. It makes no sense to seek advice on how to set up, manage, and monitor a plan from someone who has inherent conflicts of interest. Would he or she fire his or her company for not setting up a low cost plan for you? No!However, it does make sense to ask vendors to explain the laws, rules, and regulations to you).

Many employers and employees have not seen what a truly low cost plan really looks like, yet. That’s  because they have been looking for a 401k or 403b plan in all the wrong places. Their vantage point impacts their judgement, and they don’t know how easy it is to switch to a truly low cost plan. 

To set up a truly low cost plan, you must see what to do–not think about what to do.

See?

Best wishes,

Your teacher, Frank R. Cirullo

Are you curious about why so many employers miss the mark and set up a high cost 401k or 403b plan?

Would you like to know the easiest and fastest way to set up a truly low cost 401k or 403b plan?

If you already have a plan, would you like to know the fastest way to slash its cost?

An important step that many employers ignore is this.  Before you contact vendors for information about what they sell, it makes sense to get focused on the target you want to hit.  It would be a mistake to become distracted by vendors who want to convince you to switch targets.

If you shift your sight to the target you want to hit, you cannot fail to hit the mark, and you will have a truly low cost plan.  Easy!

I know that not one employer would choose a high cost plan over a low cost plan on purpose.  However, if you have a high cost plan that you believe is low cost, the only way for you to see your mistake is to compare your 401k or 403b plan to a truly low cost plan. 

Best wishes,

Your teacher, Frank Cirullo

If you don’t have an effective system of checks and balances, you probably won’t cut the cost of your 401(k) or 403(b) plan anytime soon. Just think about it. How can you cut costs that you don’t even see, yet? 

If you will take one hour to educate employees on the following six issues, they will help you monitor the plan to ensure that it is low cost. Why would they do that? It is in their best interests to have a truly low cost plan. See?

A good plan has low cost services (no hidden or camouflaged costs) and a core mix of investments that match the market’s performance. You can do yourself and the employees a favor by educating employees on the following:

1. Why you want employees to bring you their ideas on improving the plan.
2. Why your plan uses no load, low cost, index funds for its core mix of investments.
3. Why your plan provides self-directed accounts for employees.
4. How the plan is set up and why it was set up that way.
5. How the plan is managed and why it is managed that way.
6. How the plan is monitored to ensure that it remains low cost month-after-month, quarter-after-quarter, and year-after-year.

Read my articles and blog posts so that you, too, can learn how to set up a truly low cost plan, free. 

Best wishes,

Your teacher, Frank Cirullo

If you have read just one of my articles or blog posts, you know that I show you proven ways to improve your 401(k) or 403(b) plan, fast.

The only problem is this. Most people never realize that their plan can easily be improved, so they do nothing, at all. 

Just think about it. No matter how good (low cost) you may think your plan is, it probably can be improved–fast. But, first, you must be trained so that you can see your plan’s problems. Easy! I train you, free. Next, you need to be aware of how advancing technology can cut your plan’s cost.  And you need to be aware of how the vendors compete with each other for your business–why they are so successful at selling their expensive services and/or investments to plan sponsors.  It is not asking too much of you to know this stuff, because it is your fiduciary duty to be informed. And it is also your fiduciary duty to always act in the best interests of the participants (employees), right?

To see your plan’s problems, it is best to assume that you may have made a few mistakes and you simply don’t have the right kind of training to catch them. That way your mind will be open to see what you may have done that was wrong.

Okay, so how does one know where to look for mistakes?  In other words, how do you know that your plan may be costing you more money than it should?  And how is it possible to fix problems that you don’t even see–yet? 

It’s like this. You can improve your plan the easy way. Or you can hope that, somehow, you will notice your own mistakes. I bet you will never catch any of your own mistakes, which means your plan will continue to cost more than it should!

The easy way to fix your plan is to read my articles and blog posts, because I only show you the proven ideas that work every time they are tried.  That’s how you can improve your plan fast! See?

Best wishes,

Frank Cirullo

Do you really treat others as you wish to be treated?  

For instance, does your 401(K) or 403(b plan serve YOU? Or does it cost more than it should?

Remember, procrastinating on cutting your plan’s cost won’t help anyone at your company,

You can do the right thing by taking five easy steps, today:

1. Switch out of a core mix of investments that does not at least match the market’s performance.
2. Hire a recordkeeper and administrator who will charge you not more than the benchmark for the cost of recordkeeping and administration.  Remember, no hidden or camouflaged costs are allowed.
3. Manage your plan so that it is truly low cost.
4. Educate the employees so that they, too, can become part of an effective system of checks and balances.  That way they will protect themselves and your company from a renegade fiduciary who does not get it on what a truly low cost plan looks like.
5. Monitor your plan so that it remains truly low cost month-after-month, quarter-after-quarter, and year-after-year.

Best wishes,

Your teacher, Frank Cirullo

For a moment, pretend that you and an old friend and associate are discussing retirement and retirement plans. 

You say: “I think the real question is not where we will find time to improve our plan, rather, it’s how much is it going to cost us and the participants (employees) if we don’t cut our plan’s cost, today, right now.” 

Your associate says: ”I know. I read that it’s more likely than not that our retirement plan is probably more expensive than it should be.  And whose money is being wasted?  Mostly, it’s the participants’ (employees’) money, but our money is being wasted, too. I, too, agree that we should improve our plan, so let’s cut its unnecessary costs, today.”

Okay, you can stop laughing.  Let’s get back to the real world. 

I would like to communicate something important to you. Do I have your permission?

If not, please stop reading now.

Well, the truth is this. The conversation you just read probably never takes place at any for profit business or not-for-profit organization. Why? It is because most employers don’t think it is urgent to cut their retirement plan’s cost.  Instead, most employers give themselves reasons to delay improving their plan. 

By the way, if you are an employee, your employer has time to do whatever he or she wants to do, so even though it is true that he or she is busy, don’t worry about him or her not having time to improve your 401(k) or 403(b) plan.  In fact, it is his or her fiduciary duty to cut your plan’s cost now, not next week, next month, or next year when he she may have more time. 

A fiduciary (employer) must always act in the particpants’ best interests.  And procrastinating on cutting unnecessary costs, for even one week, is guaranteed to cost participants more money than you and your employer can imagine–long term!

What employers don’t have time for is the consequences of not doing anything to cut unnecessary costs.  An employer is expected to know better than to have a plan that is loaded with fat (high costs) and ignorance is probably not a defense that he or she can win with in a court of law.

You can do yourself and your employer a favor by asking your employer to visit http://fcmstudents.com/wordpress/ (that’s the Web site you are on now) so that he or she can learn how to improve your 401(k) or 403(b) plan, free. 

I always welcome your comments, because I hope they will help others do the right thing with their 401(k) or 403(b) plan.

Best wishes,

Your teacher, Frank Cirullo

The most successful business owners know when they have a problem.  And if they can pinpoint the problem, at that very moment, they will see the solution.

But it’s not like that with 401(k) or 403(b) plans that successful businesses and organizations set up.  Congress will tell you that many successful businesses and organizations have an awful plan (high cost with a core mix of investments that underperforms index funds) and those employers don’t even know it.  

The problem is this.  Many employers don’t know that their plan’s structure has created the illusion of low cost.  And the new laws, rules, and regulations that Congress wants to pass won’t force employers to finally set up truly low cost plans. 

Why? 

How can you fix problems that you don’t even see?  For instance, if three of the industry’s biggest vendors (they have the most clients) disclose a plan’s cost to you, and that cost is high relative to truly low cost plans, then a high cost plan will almost look normal to you–right?  

Congress can’t tell vendors how much to charge for their services and investments, and I like it that way because I like having a free market.  My point is this. Employers need the right kind of education–not the kind of eduction that they get from vendors who have conflicts of interest.  See?

There is only one way that you can see that your plan is not as low cost: Always compare your plan to a truly low cost plan.  Never compare your plan to the myriad of high cost plans that the vendors recommend. 

If you compare your 401k or 403b plan to a truly low cost plan it will only require a few minutes of your time, and you will see the major problems that your plan has, instantly. 

You can learn how to compare your plan to a truly low cost plan, right here, free.

First, you must be in the right frame of mind.  That way you will consider the possibility that your plan is not low cost. 

Remember, you have a fiduciary duty to always act the the best interests of the participants (employees) and their beneficiaries. And a high cost 401(k) or 403(b) plan does not serve the participants or you (the employer), at all.

Best wishes,

Your teacher, Frank Cirullo

Before we begin today’s lesson, I want to remind you of this.  Congress said that most plans are more expensive than they should be.  Also, they said that most employers and employees don’t even know how much their plan costs them.  Please be nice to service providers (vendors), but be careful of who you hire.  Only hire a vendor who will optimize your plan according to the instructions YOU give to him or her. 

Many years ago I was working my way through college, and I had a barber who was really a cool guy.  He wasn’t good at cutting hair, but he was cheap, and at that point in my life I had to watch every penny. My barber was always busy–it turns out that other people must have thought he was cool, too. 

One day, while I was waiting my turn for a haircut, I saw something that I had not seen before: My barber asked each customer how they wanted him to cut their hair; then,  he would look them right in the eye and repeat what they told him to do–”Okay, you want me to take a little off here and there, but you want it longer here…got it!”  The only problem was this.  He cut every man’s hair in the very same style.  That’s right, his customers looked alike as they left his shop!  And, at that moment, I realized that after he cut my hair I would look like the rest of his customers–no matter how I asked him to cut my hair! Imagine getting a haircut; then, you notice that every woman is leaving the beauty shop with the same hairdo.   How would you feel about your new hairdo?

You may be thinking, “What the heck does that have to do my 401(k) or 403(b) plan?” 

Well, there are many  cool vendors (service providers) who know how to advertise and market, and they are highly trained salespeople, as well.  In fact, they know every one of your objections before you say one word.  Now, that would not be bad if they were acting in your best interests and set up a plan for you that is optimal.

Facts are facts: Not one vendor will  fire his or her  company for selling you a high cost plan that only appears to be low cost.  Nor will he or she refer you to a truly low cost service provider who can provide better service for a lower fee. 

My point is this.  If you really want a truly low cost plan, you will have to set it up yourself by giving the vendors instructions on what you want them to do.  But you should seek advice (from the vendors your hire) on the laws, rules, and regulations.  However, just remember that it would be a mistake to ask a vendor how to set up a truly low cost 401(k) or 403(b) plan.

This is the bottom line: Your plan is either optimal or it is not.  The word “optimal” means that it is truly low cost with a core mix of investments that match the market’s performance day-after-day, month-after-month, quarter-after-quarter, and year after year.  Easy! 

If you could sit in on some meetings with various service providers and employers, you would see and hear about the same thing at every meeting–no matter which company or who gave the sales presentation.  Just like my barber, who was good at acting like he listened to his customers, service providers will waste your precious time asking you many questions, but they will sell you whatever is profitable for them.  Remember, you must protect the employees (participants in the plan) at all times.

Lessons learned:

Lesson 1: If a service provider happens to be an insurance company ( No, I am not picking on insurance companies), then every plan they sell will look the same–no matter what the employer says he or she wants.  Ditto for brokerage firms, mutual fund companies, registered investment advisers, and financial planning firms.  No matter what the employer tells a service provider, he or she will come out of that meeting with a 401(k) or 403(b_plan that looks like all of the others that that vendor recommends. 

Lesson 2: Not one salesperson (vendor) who works for a brokerage firm, mutual fund company, registered investment adviser firm, financial planning firm, or insurance company has at least a ten-year track record of picking mutual funds that beat a diversified, core, mix of no load, low cost index funds in performance.  Yet, they may try to encourage you to make a costly mistake by picking a mix of managed funds and/or asset-allocation, target-date, lifecycle, lifestyle, and balanced funds from a large universe of 10,000 or more funds. Just think about it.  What they are really doing is encouraging you to experiment with the employees’ (participants’) retirement money.  Is that prudent?  No!  Instead, it’s prudent to give employees a diversified, core, mix of no load, low cost, index funds that will match the market’s performance.  Employees who think they can beat the market (index funds) can set up low cost self-directed accounts.  See?

Now do you see why it would be a mistake for you to ask the service providers to assist you in setting up a plan?  Always, ask for a track record of at least ten-years and watch out for cherry picked funds that the investment adviser did not pick for any 401k or 403b plan, back them.  And watch out for cherry picked time frames, too.

Lesson 3: Rather than ask service providers (salespeople who have inherent conflicts of interest) for advice on how to set up a 401lor 403b plan, it makes more sense to give vendors instructions as to what you want them to do for you.  For instance, you can pick up your telephone and say,  “Can you get me the following items?” 

1. A diversified, core, mix of no load, low cost index funds? Pay not more than 0.07% to 0.20%, per year.
2. Low cost self-directed accounts for employees who still believe they can beat index funds in performance.
3. Low cost recordkeeping and administration that is timely and accurate.  Pay not more than the benchmark, which is $25.00, per eligible employee, per year.  Remember, no hidden or camouflaged costs are allowed, because they create the illusion of a low cost plan and you may not catch it if you are not paying attention.

That’s how you set up a truly low cost plan with a core mix of investments that will at least match the market’s performance.

By the way, you can learn more about how to set up a 401(k) or 403(b) plan that is optimal (truly low cost), right here, free.

Best wishes,

Your teacher, Frank Cirullo

Guess how many employees have a 401(k) type plan? 

If you guessed that plans have an estimated 65 million participants, you would be right.  Just think about it.  That’s 65 million people who are being charged more than a plan should cost, these days.

Yes, the cost of most plans is high, but the good news is this.  The U.S. Department of Labor has proposed some new rules to improve disclosure of fees and expenses.  It’s not final, yet…so don’t get too excited. 

You should check it out at the U.S. Department of Labor’s Web site: http://www.dol.gov/ebsa/newsroom/08-991-NAT.html

Best wishes,

Your teacher, Frank Cirullo