Editor's Note: This article is part of a Financial Advisor series "How I Solved It." Advisors describe a problem client and what they did to help.
It’s not every day that an advisor meets a client who is juggling a dozen 401(k) plans. When they do, as in this case, it’s likely that too much of a good thing has gone bad.
Bill Van Sant, a CFP and managing director of relationship management at Girard, the wealth management division of Univest, was approached 10 years ago by a colleague whose father was being bombarded quarterly with statements from his 12 different 401(k) plans. The father didn’t contact his plan providers because he didn't know what to say to them and was afraid of messing up.
His hesitancy turned out to be a good thing. Using incorrect terminology with plan representatives—who may ask different questions from firm to firm—could trigger the wrong kind of distribution and an irreversible, costly error, said Van Sant, who is based in Souderton, Pa.
“Once the toothpaste is out of the tube, it can’t go back in,” he said.
The overwhelmed account holder, then 55 or 56 with about $450,000 in combined 401(k) assets, brought a six-inch-thick binder stuffed with plan statements from the past year to his first meeting with Van Sant.
The man wasn’t a classic job hopper, although it might have appeared that way. He was an engineer who spent much of his career working on projects that generally took two to four years to complete. During the duration of each project, he became an employee of that company and was enrolled in its 401(k) plan.
The engineer, who became a client, told Van Sant that he was probably 10 years away from retiring. He didn’t know how his plans were invested or his plan balances. He had underestimated his total plan assets by $60,000 to $70,000, said Van Sant.
One of the plans held all cash and another was entirely invested in company stock. “There was no cohesive strategy,” said Van Sant. “The bulk of his retirement assets were aimlessly out there.”
The client told him that if he saw on the news the night before plan enrollment that real estate was performing well, he’d pick a real estate fund. The client made cash allocations when the market wasn’t doing well.