Retirement Planning Challenging the Status Quo

In Conversation with Invest n Retire® CEO Darwin Abrahamson

Nov 4, 2009

Invest n Retire® is one of the pioneers in the retirement market designing a recordkeeping system to cost-effectively trade exchange traded funds (ETFs).

Mutual funds currently dominate the retirement market. They engage in the practice of tying payment for plan services to revenue sharing practices. Invest n Retire‚ LLC eliminates revenue sharing fees and designed a patent pending unique recordkeeping system and methodology to manage tax-deferred retirement plans which allows employees to own whole and fractional shares of ETFs allowing them to make informed decisions about their retirement plan. Experts agree that the multilayered fee structure within mutual funds have a negative impact on the performance of 401(k) plan particpant accounts.

Darwin Abrahamson is founder and CEO of Invest n Retire. His company’s mission is to provide seamless retirement management planning challenging the status quo. Abrahamson recognized that current providers were not achieving participants’ retirement goals and according to him they still are not doing so.

“The proof is that current retirees have a median balance of $61,346 in their 401(k) plan”, explains Abrahamson. “The median participant balance at year-end 2008 was only $43,700. Clearly, no one can live on this low amount of money. This is not only inadequate for retirement but barely adequate for one year of retirement income.”

His company offers an alternative solution. What differentiates Invest n Retire (INR) from its competition is the fact that Invest n Retire uses a patent-pending proprietary system developed exclusively for the plans that have retained them for daily plan administration services.

The volatile markets and increased government oversight has moved the retirement plan industry to low cost recordkeeping and investment platforms designed to fully disclose all fees to plan participants. Exchange Traded Funds or ETFs fulfill the need for transparency and low cost investments. “Invest n Retire’s system for managing tax deferred retirement plans was designed specifically for trading ETFs”, states INR’s CEO Abrahamson.

The Role of Independent Fiduciaries

INR uses both 3(21) independent fiduciaries and 3(38) investment fiduciaries to minimize the fiduciary responsibilities and liabilities of the 401(k) plan sponsor. “Our recordkeeping database is designed to contain all provisions of a plan document which reduces errors and mistakes often created by other recordkeeping systems”, explains Abrahamson. “Many of these errors and mistakes require fiduciaries to hire an ERISA attorney and use the IRS voluntary correction program in an expensive and time consuming process.”

Protecting Retirement Plans in a Volatile Market

The current volatile market has been devastating to most retirement accounts. According to Abrahamson INR’s participants have stayed in their managed asset allocation models “which protected them from selling in the down market and buying back in the up market.” This can be largely attributed to the fact that the company’s managers use ETFs or institutional funds as investment options rather than retail mutual funds which have been a no win investment in volatile markets”, explains the CEO.

The challenge for a company like Invest n Retire is the competition of large providers and brokers who control most 401(k) plans. “They don’t want us to succeed because it threatens their profitability and hidden fee structure”, asserts Abrahamson. “Many plan sponsors believe their investments are safe with a big name provider such as Fidelity or the Principal but don’t understand the fees, services.

For example, neither one of these providers or their advisor are accepting any fiduciary responsibility under their plan and that as fiduciaries they are responsible for all decisions these providers make.” By contrast, 3(21) independent fiduciaries and 3(38) investment managers assume many of the fiduciary responsibilties that the likes of Fidelity and Principal refuse to accept.

The efficient structure of ETFs makes them an effective investment option for institutions and high net worth investors. The diversification, transparency and low cost of ETFs are a compelling alternative to mutual funds.

The copyright of the article Retirement Planning Challenging the Status Quo in Business CEOs is owned by Britta Stromeyer Esmail. Permission to republish Retirement Planning Challenging the Status Quo in print or online must be granted by the author in writing.