If an employee picking a retirement plan were a song, benefit planners know the words by heart. It goes like this: A person starts a new job, he or she attempts to read the packet of information or register for the 401(k) website and soon grows frustrated. Knowing they have to decide about the 401(k) plan, they set it and forget it.

Juli McNeely, president of McNeely Financial Services based in Spencer, Wis., says it happens all the time.

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Craig Wear

“They get a packet of information or they are sent to a website to gather information and oftentimes they're not comfortable at all going there,” she says. “I can't tell you how many individual clients come to me with their 401(k) packets because they don't feel equipped to even complete the paperwork and make the choices of where to invest.”

And this is just picking the right retirement plan with their appropriate level of investment risk tolerance. It doesn’t even address changing their 401(k) plan years after they are up and running and are vulnerable to market swings and new investment opportunities.

“It just shows how desperate they are that we need more than just words on the page to make consumers comfortable in participating,” says McNeely.

Enter Active401k, a new web-based subscription service that enables financial advisers to position themselves as the go-to person for protecting and growing a client’s 401(k) plan and their net worth. The solution was introduced this July by Craig Wear, a certified financial planner and founder of Q3 Advisors and Game Plan Advisors.

“I've spent 30 years as an independent RIA and one of my biggest challenges when people come to meet with me has been that they get a lot of their assets in their 401(k) and I've had some significant limitations of being able to give them effective or efficient guidance,” says Wear.

Wear adds, “And yet that's some of their biggest assets that they're going to retire with.”

Professional advice
Active401k is accessed through my401k.com and consists of a risk tolerance quiz for the 401(k) client. It delivers access to a database with nearly 4,000 company plans with what Wear believes is “the most up-to-date current investment options.”

“On a quarterly basis we push out specific customize investment recommendations using the existing investments in their plan,” says Wear. Clients are notified of the recommendation via text or email and if they agree, their 401(k) plan is updated.

“A cool part is the guy who's participating in the 401(k) now has somebody giving him professional investment advice that is more than just ‘stick it in a lifestyle fund and leave it alone until you retire,’” says Wear. And he adds, “the financial adviser has a way to tether himself to those assets in a more meaningful way than they have ever had in the past.”

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Wear describes his solution as a tool to help “an active technical manager within the limitations of most 401(k) plans.” Although he and his advisers will rebalance a retirement portfolio on a quarterly basis, they watch for the “relative momentum of the different investment options and then select among those that are seen to be performing the best.”

“If your investment options are in your list of investment options, then our models will tell you get out of pharma and go to telecom or get out of energy and go to finance. [Depending] however granular the investment options inside your plan are is how granular our investment recommendations will be,” says Wear.

Constant demand
According to the Spark Institute, a nonprofit entity that represents the retirement industry, the need for more retirement advice continues.

“There's always been demand for advice or for assistance in helping to save for retirement. Whether or not that desire is increasing or decreasing I haven't seen any recent reports on it,” says Tim Rouse, executive director of Spark Institute.

“But our membership is very interested in how they can help support the adviser market in whatever direction it goes,” says Rouse.

Right now, Wear claims to have more than 100 subscribers signed up for Active401k and his firm is using social media to promote the offering.

Wear says, “The real value in this is, at the street level, for the person who matters most — the person who's actually working and saving the money. There is no one in his or her life right now willing to tell them what to do with his 401(k) or is willing and able to do it in an efficient and cost-effective way.”

Due to the liability involved in investment advice, Wear adds that “the HR department can't touch it with a 10-foot pole.”

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McNeely recalls a couple who recently visited her who were close to retirement. They discovered that they had eight different 401(k) plans that had not been updated or consolidated since they were implemented decades ago. Fortunately, they discovered that they were in good financial shape, but this easily could have been disastrous, she says.

“What if we had had a huge market correction and they weren't prepared for it and they needed to tap their money in a short order?” she asked.

“I think it's really important to provide as much advice to participants about their 401(k)s as possible,” she says.

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