Reason #1 – FULL of Proprietary Investments
Chances are if you are participating in a company pension plan then you are subject to a suite of investments that are either proprietary or are “selected” by the provider for you on your behalf.
What proprietary means is that the investment options available are decided upon by the pension provider and marketed to you within the plan. Although this is to be expected, the effect of such influence certainly needs to be clearly understood.
For example….A Ford dealership will never recommend a Chrysler product when shopping for a new vehicle regardless of your needs as a customer.
But obviously this makes perfect sense.
However, it doesn’t necessarily make it the best experience for the consumer.
Investment management is not any different…
The problem, however, is that by possibly not having the correct investment options within your pension’s portfolio actually may not be able to adequately protect your investment portfolio. If markets sell off suddenly, which they always do, your assets are extremely vulnerable to risk.
Furthermore, too often decisions on why an investment may be included or not, is based on the profitability of that particular investment for the provider themselves….Not the individual investors inside the pension plan.
Efficiency is not the objective of the pension manager. Profit is.
Remember that, after all, these are big businesses and these companies have shareholders of their own to satisfy.
This is not wrong….it is just a fact of life.
It unfortunately does not align the interests of the pension provider and that of the investor.
Now, because you have no choice in what you have to invest in, simply do your homework and/or consult with an independent advisor….I repeat, an INDEPENDENT Advisor!!! — By selecting an independent advisor you are ensuring that there are no “proprietary” pressures influencing the decisions and advice from that advisor and that they are suggesting the best options available to you.
With literally thousands of investments available to investors under independent investment platforms, it is clear to see that some choices have to be made. — But it is the nature of how these choices are made that investors should be worried about.
Just remember that these limited choices affect your portfolio’s performance, especially when stock markets pull back significantly. — And they always do…
So… it goes without saying that as soon as you have an option to transfer your pension out of a plan that you strongly consider it. This may be a result of either a job or career change or even retirement.
The risk is simply far too great not to consider this option.
Precedence Capital / Gravitas Securities Inc. –
The views, opinions and positions expressed by the author and those providing comments on these blogs are theirs alone, and do not necessarily reflect the views, opinions or positions of Gravitas Securities Inc.