403b

Benefits of Integrating Your 401k

Improved Investment Diversification

Investment diversification is a key factor in reducing risk and maximizing returns in a portfolio. However, holding assets in multiple accounts at different institutions can make it difficult for investors to achieve true diversification. This is where considering held-away assets can play a crucial role. By taking these assets into account and incorporating them into an overall investment strategy, financial advisors can help clients achieve a more diversified portfolio.

Improved Tax Efficiency

When managing a portfolio, it’s important to consider not just the type of investments being held, but also the tax implications of those investments. For example, qualified accounts like 401(k)s and IRAs offer tax benefits, but also come with limitations on when and how funds can be withdrawn. On the other hand, taxable accounts (i.e., brokerage account) offer more flexibility, but may have higher tax implications. By integrating your 401k, financial advisors can assist clients in balancing the tax location of investments and create a more diverse portfolio that takes into account both qualified and non-qualified (taxable) accounts.

Improved Risk Management

If you’re like most employees, you do not know what kinds of risk there are in your 401ks at any given point in time. If you don’t get the risk right, then you may not stick with the portfolio and financial plan. 

Risk management is a critical component of any successful investment strategy. By integrating held-away assets, financial advisors can help clients better manage risk and achieve their investment goals. One of the primary benefits of incorporating held-away assets into an overall investment strategy is that it allows for a more comprehensive view of your financial situation. This increased visibility can help financial advisors make more informed decisions about the allocation of investments, allowing them to manage risk more effectively.

For example, you might have a bunch of U.S. large cap equities in your brokerage account, and then you decide to buy a U.S. stock market ETF index for your 401k. By not considering both buckets, you could essentially “double-up” and have a concentrated risk position.

When financial advisors have access to all of a client’s 401k and retirement plan information, including held-away assets, they can better track investment performance and rebalance as needed to manage risk. This can be especially important in times of market volatility, when swift action may be needed to protect a client’s investments. 

Increased Efficiency

Employees are often busy with their job or their family and don’t have time, nor the expertise to research 401k options or rebalance their 401ks.

Incorporating held-away assets into an overall investment strategy can streamline the investment process. When assets are held in multiple accounts at different institutions, it can be time-consuming for clients to manage their investments and keep track of their portfolio performance. By considering held-away assets, financial advisors can provide clients with a more comprehensive view of their investments, reducing the need for them to constantly monitor multiple accounts. This can save clients time and increase efficiency, allowing them to focus on other aspects of their lives.

Expertise Management

Managing a 401(k) can be a complex and challenging task for individual employees who lack the necessary knowledge, skills, and experience in trading and asset allocation. Without a proper understanding of the markets, investment risks, and the various investment options available, employees may make costly mistakes that can have a significant impact on their retirement savings.

For example, an employee may be too aggressive or too conservative in their investment decisions, leading to a portfolio that is either heavily invested in risky assets or lacking the diversification needed to mitigate risk. In some cases, employees may even miss out on investment opportunities due to a lack of knowledge or a tendency to make emotionally driven decisions based on short-term market movements.

Moreover, managing a 401(k) involves more than just selecting investment options. Employees must also monitor their portfolios, rebalance as needed, and make trades based on their long-term investment goals and risk tolerance. Without the expertise and resources of a professional financial advisor, it can be difficult for individual employees to effectively manage these tasks and make informed decisions that align with their investment objectives.

Studies have shown the shortcomings for investors managing their own 401(k)s and retirement accounts. These studies by Vanguard, Russell, and Envestnet conclude that having professional management on these accounts may generate up to 3% better performance each year net of fees.

How Our Intelligrations® Integrate Held-Away Assets

At Intelligent Investing, our passion is to minimize financial stress and maximize lives. Efficiency is a critical component of any successful investment strategy, as it allows clients to minimize their time and effort.

Previously, the tools were not available to fully manage held-away assets, which can be a significant part of clients’ overall portfolios. However, recent technology has allowed us to be able to manage these assets alongside the other assets we manage, giving us a fuller understanding of our clients’ financial picture.

Using our proprietary Intelligrations®, we now can use innovative technology to provide even better service on these accounts. Intelligent Investing is now able to make sure the entirety of our clients’ portfolios are taken care of including their 401(k), 403(b), and other retirement accounts. Our clients receive a personalized risk number that encompasses their entire portfolio in real time (assets we are directly managing, and assets that we manage in their held-away accounts (i.e., your 401(k), 403(b), etc…)

When markets get fearful or greedy, we can trade assets including the ones in their 401(k) or 403(b). We think this is a fantastic way to minimize their financial stress and maximize their lives.

Now our clients don’t have to wonder, should I be doing some rebalancing or making trades inside my 401(k), or wondering what their asset allocation should be inside their 401(k).

We can now proactively manage, monitor and trade these accounts just like your other assets with us. We are really excited about what this can do for our clients to make sure all of their assets align to their goals. This truly is intelligent investing.

Conclusion

In conclusion, considering held-away assets can provide numerous benefits for both financial advisors and their clients. It can improve investment diversification, allowing for a more comprehensive and balanced portfolio. It can also improve risk management by providing a more complete picture of a client’s financial situation and reducing the risk associated with an over-reliance on any one particular investment. Additionally, considering held-away assets can increase efficiency by streamlining the investment process, reducing the need for frequent transfers, and allowing financial advisors to more effectively track investment performance. By considering held-away assets and incorporating them into an overall investment strategy, financial advisors can help clients achieve their investment goals with greater ease and confidence.

At Intelligent Investing, we have the ability through our proprietary Intelligrations® to monitor, manage, and trade within accounts that are held-away (401k, 403b, etc…).