Lisa Crosby, the Benefits Manager for Fujitsu, spoke this fall at the 12th Annual Benefits Management Forum & Expo in Nashville about Fujitsu's decision to contract with a third-party investment advisor and about how it chose an investment advisor.
Fujitsu America decided to provide on-line investment advice to its 401(k) plan participants, even though Fujitsu provided employees with the standard investment education tools. The company felt investment advice was needed because, despite the standard tools they had, participants were still asking, "how much should I be saving?" and "how should I be investing my money?"
"In many cases, employees would ask me what I would do if I were in their situation," explained Crosby. Since she could not give investment advice to the participants without worrying about being liable for their decisions, Crosby decided to look for a third-party investment advisor.
Fujitsu selected 401(k) Forum, which is an online investment advisor. Investment advice provided by an online service provider is convenient, affordable, personalized and objective, explained Crosby.
Selecting an investment advisor.
Fujitsu went through a due diligence process before hiring its online investment advisor, and the company continues to monitor the advisor's activity, Crosby said. Also, before hiring an investment advisor, she discussed the idea with attorneys, the 401(k) provider, and consultants. Crosby said that she examined the investment advisor's:
- ERISA and 401(k) expertise;
- financial methodology (i.e., it is applying generally accepted investment principles?);
- interactive education; and
- indemnification for investment advice for the plan sponsor.
Liability of investment advisor.
With respect to fiduciary responsibility and potential liability for investment advice, the investment advisor will be liable, said Steve Barham, a representative of 401(k) Forum. Barham explained that, each time a participant receives advice, the participant views a disclaimer. The disclaimer states that only 401(k) Forum, and not the plan sponsor, will be liable for the investment advice. 401(k) Forum also promises to provide indemnification for the plan sponsor, if necessary.
Services provided by online investment advisor. According to Crosby, Fujitsu chose 401(k) Forum as its service provider because it offered interactive education, customized plan information, and personalized investment advice based on each participant's unique situation and goals.
The investment advisor provides a seven-chapter interactive education course, Crosby explained. The chapters cover finance, investing, 401(k) plan basics, and the principles of bear markets, among other things. A participant will receive a certificate of completion after he or she has completed the seven chapters, said Crosby. Human resources also is notified of the "graduation," she added.
Personalized investment advice.
In seeking advice, participants are able to download their 401(k) balances from the provider's Web site, said Crosby. Barham added that 401(k) Forum personalizes investment advice based on the participant's (1) risk tolerance, (2) financial goals and current situation, and (3) the time horizon.
In addition, the investment advisor will send e-mails to participants on days when the stock market indicators decline. The message might say something like, "this fluctuation should not worry you because you are investing for the long term," said Barham.
Overall impact on 401(k) plan.
Overall satisfaction with the 401(k) plan has doubled since Fujitsu started using the online investment advisor, Crosby reported. Approximately 64% of participants are using 401(k) Forum, and about 66% of those participants have completed the educational courses and the full planning and advisory services offered to them. The cost is $20 to $50 per year per participant, said Barham.
Fujitsu has 2000 employees in various locations in the United States. Many of the employees are line workers, who access the online investment advisor via kiosks.
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