Oh, you do 401k rollovers too?
Updated: Feb 4, 2020
The investing industry is confusing. Well educated, successful people’s eyes glaze over when you start talking about investing. I’ve seen it. I get it.
So it is no surprise when I get this question.
But after having tons of these conversations, I’ve learned it isn’t the real question. The real question is actually:
“I don’t understand how you guys operate. What kind of account can I open, what do you need from me, and what money can I invest with you?”
On behalf of the industry, let me answer as plainly as possible.
What kind of account do I open?
If you are investing money for the future, your investment adviser can open an account for you.
Yes, we all know retirement is something you can and should invest for, and there are no shortage of retirement accounts - IRA, SEP IRA, ROTH IRA, SIMPLE IRA, etc. But that’s not the only reason financial planners exist.
You can invest money to buy a home, pay for college, buy a vacation property, give to charity, grow your money for no particular reason, etc.
There are countless reasons to invest, and there is an account for just about every reason.
**Remember, if you’re putting money away for the long term, you can invest it.
How does it get opened?
The account-opening process is not too different from opening an account with Amazon or Facebook, although you'll provide far more personally identifying information to your advisory firm than you would to Amazon or Facebook.
First you provide all the necessary personal information. Then your advisory firm opens the account at the appropriate bank. It's that simple.
Opening an investment account is akin to opening a checking account at a bank.
And that process doesn't change whether you’re opening a rollover account, taxable account, ROTH IRA, etc. All accounts are primarily opened the same way.
**Remember, the account opening process should be painless. You provide your information; the account gets opened.
What money can I invest with you?
In most situations, your adviser cannot touch the money invested in your current company's 401k/403b plan. But that’s not always the case. Look through your plan document (or have your adviser look) and see if there is a “self-directed” option. If there is, you can have your personal adviser manage your 401k investments.
Other than that, you can invest your money how you choose. For example:
Did you open your own brokerage account but now want to have it professionally managed? Investment advisers can take over.
Do you have an old 401k that you don’t know what to do with? Your adviser can roll it into an IRA.
Do you have money invested with an old adviser that you want to transfer to a new one? That happens all the time.
Do you have cash in a safe in your house and realize that’s not the greatest place for it? You can open a general investment account.
**Remember, there’s no magic money tree reserved for investment advisers. Unless your current 401k/403b restricts you to the plan’s fund menu, you can invest your money with whomever you want.
Now that fog has (hopefully) been lifted, you can feel confident understanding the mechanics of investment account openings and what money makes the most sense to have your adviser manage.
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