We are currently in the process of establishing a 401K at my place of employment. Our trustees, a bank, says that Vanguard doesn't sell funds through banks, hence we can not have any Vanguard Funds in our plan. Other sources advise that they can get Vanguard if they want to. Does any out their know what the true story is with regards to Vanguard Funds availability through various brokers?
for rclyde:Does any out their know what the true story is with regards to Vanguard Funds availability through various brokers?My hunch is that your bank is not interested in helping you get into Vanguard because there's little prospect of continuing fees for the bank.I hold my Vanguard Index 500 in my IRA and in my taxable account, both of them at Charles Schwab. Schwab's commission on Vanguard funds, according to data I verified tonight, isPurchases up to $15,000 0.7% of the purchase amount, but at least $39Purchases over $15,000 0.7% of the first $15,000, plus 0.2% of the amount over $15,000, but a maximum fee of $149. Schwab charged me nothing to open the account and nothing to keep it open.Regards,Chips
Hi rclyde:The problem is with your employer's choice of trustee in the beginning. The employer should do some research to find out who could provide the kind of service required by the employees. Most employers never bother to ask the employees what trustee services they would like to have. Employers usually assume that they know more about what the employes should have than the employes would know, so they get what the Salesmen recommends. As a prior post mentioned, many banks would not offer outside funds, simply because they would rather keep all of the fee structure for themselves. Many bank trustees allow self directed options, which allow you to directly invest in stock of other companies, as well as other funds. Vanguard does offer an approach for other trustee companies to offer their funds. This I know because my son's 403B that is managed by a bank, offers Vanguard, Janus and Fidelity as well as the banks own funds. The pain is that you aren't getting Vanguard at the low fee offered by Vanguard outside of your 401K. It will have Vanguard's normal 1/2 percent fee, and the trustee bank will add another 1/2 percent (or more). This however is usually a better position than through the trustee's own offerings of funds. Trustee banks usually offer the lowest performing funds with the highest internal fees and lower cost to your company (some offer free accounting etc.), thus your 401K underperoforms the market continuously. This doesn't alter the fact that you should maximize your contributions to the 401K by any means, because there is no way you can beat the 401K tax deferred result, underperforming funds not withstanding, unless you are working for a very successful company and are lucky enough to have a giant pile of stock options. What it does say is that you should gather as much support among other employees as you can, and then go to straight to the top and put as much pressure on that person as possible to get the 401K program under the best trusteeship. In the case of one of my former employers, when I came aboard the company in 1988 we were with a bank that offered only 4 funds, none of which had a history of greater than 4%/yr growth and one of them had a record worse than savings bonds. It took two years to get that changed, but by 1986 we were in a trustee that allowed self direction, including other funds and stock. I and my friends that had pushed for the change were able to achieve near 9% growth the first year (unbelievable at that time), while our moneymarket oriented peers stayed at the older rates, under the impression that these funds were "safer." Remember that "safer" funds that underperform the market cost you more in lost potential retirement income than you could possibly loose in a 20% market drop. "Safe" in the vernacular of trustees and fund managers means more for them, and less for you.Fool ON rclydefoolThe Nerdifool
The Nerdifool:Appreciated your remarks and the information is valuable. One problem though,..I am the top guy & the trustee was selected with input from employees.I might also say that we have fourteen funds to choose from and the selection of funds is much better than what they orginally suggested. I a strong supporter of Vanguard, but have been alittle frustrated that they aren't available, except under terms as you outlined.Main reason for a local bank, is because we are a statewide company and the employees wanted local offices that they could go into a receive counsel and advice.I feel strongly enough about the plan that I'm rolling by defined benefit amount into this new 401K, even though I am only one year from retirement. I have other sources of income, which I will live on for the first three or four years of retirement, to give the 401K a chance to grow before I start drawing on it.Thanks again for your advise and information, even if I licking a few wounds. Happy trails......
Hi again rclyde:From what you say, my shoe didn't fit you anyway, so you don't need to assume any wounds. Never take my nerdishit personally!I don't know how it is in your state but Fidelity has reginal branch offices all over my state (CA), one about 8 miles from my house. They managed my company's 401ks for the last 7 years I was there. Great outfit for that job.Fool on rclydefoolThe Nerdifool
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