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A Look Beyond the “Normal” Reasons for Changing 401k Providers.

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On Pointe – 401(k) Edition


A Look Beyond the “Normal” Reasons for Changing 401k Providers.

Emerging Industry Executives should know these 4, actually 7 good reasons to consider changing 401k providers.


There are a few of the more obvious reasons for changing 401k providers. But there are a few more that often fly under the radar. And we’re going to peel the layers away to expose some important issues you need to consider.

We all know, the plan is a valuable tool for retirement savings, but it is only as good as the provider managing the plan.

Let’s highlight the “Big 4” reasons to change providers first. Then, we’ll share with you a few of the less obvious…

1- High Fees-One of the most common reasons to consider changing your 401k provider is high fees. There are many fees like third-party administrator, record keeper, investment, and advisor fees. Usually, these are priced out based on the amount of assets within the plan. So, if your plan has grown significantly over the past years, you may be due for a break in fees. A new provider may be all too happy to accommodate you!

2-Poor Investment Options – This may not be as obvious, and the investment menu may suit some while not others.

Set menus are a thing of the past. If your provider has limited investment options, you may find a new provider has plenty to offer. You simply need to have the flexibility to design an investment menu that suits you and your employees.

There is another reason to move your plan which I’ll share later in this On Pointe…

3- Poor Customer Service- This is the most obvious reason for changing customer service. If you have questions or concerns about your plan, you want to be able to get answers as efficiently as possible. If your current provider has poor customer service, it may be worth looking for a new provider.

The other angle is making sure you have knowledgeable customer service. Even we 401(k) advisors rely heavily on knowledgeable sources. Especially with ERISA/DOL laws changing so often.

4- Poor Plan Performance- If your 401k plan is not performing as well as you would like, it may be time to consider a new provider. There may be many factors contributing to low performance. A few factors may be low employee participation and underperforming investment options. Many of these problems can be found through a benchmarking exercise most plan providers offer (hint… we can as well!)

Now for our “under the radar” but super important considerations.

5- Lack of Fiduciary Reporting- Do you know where your Fiduciary file is? NO? What will you show the Department of Labor about your plan when they knock on your door? You will need to prove that you have a documented process for reviewing your plan. Also, the larger the plan the more you need to protect yourself. When was the last time you documented a review of your plan?

6-Proprietary Funds- Are investment options from the same company that manages your plan? Too many proprietary funds can be a red flag. Why? The 401(k) provider has an interest in having as many of their funds in the plan to collect the extra fees. As a plan sponsor, you may have the fiduciary responsibility for documenting because the menu is full of proprietary funds.

7-Poor Administration- Administering the plan shouldn’t be your responsibility all the time. Your staff shouldn’t be spending most of their time carrying out your plan. They should be working to help grow your business. Some 401k providers offer expanded resources to help with the duties of plan administration. Payroll integration is another service that may ease some of the burden.

As you can see, there are a lot more considerations when evaluating your plan.

The most talked about are the fees you pay, which is important. They’re hard to find and understand.

The least talked about is fiduciary responsibility. This may be the most important consideration, albeit it isn’t too hard to get the right help and advice.

The best way to uncover potential plan shortfalls and how your plan ranks is to benchmark it. Many 401(k) providers offer benchmarking services and we do as well… more info here.

Thank you for reading and see you in two weeks.

Take care,

Jim Gibbons

Alpha Pointe Capital
1997 Annapolis Exchange Parkway, Ste. 300
Annapolis, MD. 21401

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Registered Representative of Thurston Springer Financial and Investment Advisor Representative of Thurston Springer Advisors. Securities offered through Thurston Springer Financial, Member FINRA, SIPC. Advisory services offered through Thurston Springer Advisors, an SEC Registered Investment Advisor. Alpha Pointe Capital is a DBA of Thurston Springer Financial and Thurston Springer Advisors.