For many university employees, their 403(b) accounts are their largest single assets. Typically, investments are structured around determining appropriate funds, and ongoing monitoring is the norm. However, most 403(b)s, including those at Cornell, are not set up this way. Account owners are tasked with choosing their own allocation, which is often inconsistent with their risk level. Given the magnitude of these accounts, NHFS launched our 403(b) rebalancing program many years ago, completely managing these accounts on behalf of our clients to ensure proper diversification in changing investment environments.
What is rebalancing, and why is it necessary?
While an appropriate asset allocation is important, without maintaining the desired proportions of stocks to bonds, domestic to international and large to small, allocations become too heavily weighted toward sectors that have recently been performing best. Our answer to this is dynamic rebalancing, which keeps these ratios intact over time. Ongoing reviews ensure that the allocation remains appropriate for you. We have eight risk adjusted models to choose from, so there is sure to be a model that fits your tolerance for volatility, timeframe for use of these funds, etc.
Introducing Socially Responsible and Values Based 403(b)s
Offering values-based investment options for 403(b)s has always a goal of our advisors, but it wasn’t until recently that this became an available option. In the many years we’ve serviced these accounts, we’ve seen increasing demand for funds that are screened for their environmental, social and governance attributes. While Fidelity and TIAA include some SRI (socially responsible investing) options; we are now able to provide fully diversified arrays of funds from a wide variety of highly respected specialists in the SRI universe.
What makes these funds values based?
Rather than a mashup of Fortune 500 companies, our fund options utilize both negative screens (excluding companies that produce objectionable products or services such as weapons, tobacco products and private prisons) and positive screens (intentionally choosing companies that receive high marks for attributes such as board diversity, environmental responsibility and employment practices.). Models range from extremely conservative (holding mostly bonds and cash) to aggressive (mostly stocks). We apply the same risk tolerance and timelines that we do for all of our investment clients ensuring an appropriate allocation.
Will I sacrifice returns?
Lower returns for socially responsible funds may have been an issue in the past, but it is now quite the opposite! A recent Motley Fool article (https://www.fool.com/investing/stock-market/types-of-stocks/esg-investing/) gives a great primer on ESG investing, as well as siting studies which debunk the belief that these investments perform less well than their non ESG counterparts.
What does it cost?
Accounts under $1M are charged 90 basis points (.9%) per year. Accounts over $1M pay a smaller percentage. Fees are deducted from the account on a quarterly basis, so our high touch service is paid with pre-tax dollars. In addition to determining and monitoring your allocation, our fees include moving the accounts for you, keeping personal information up to date, monitoring beneficiaries and a host of other account service items you won’t have to do for yourself. Clients who opt to have us manage other assets, create their financial plan and/or prepare their annual tax returns enjoy additional discounts for bundling services.
Other values based options
If you like the idea of this service but don’t care for ESG investments, we have models for clients who prefer Christian values, and models that have all the features of our Sustainable 403(b) program without any screens at all.
What if I’m already retired or no longer with a university?
If your accounts are still 403(b)s, you can still invest with us. If not, call our office to discuss alternate ways to access these portfolios.
Is there a minimum?
Yes, the minimum for these portfolios is $50,000.
Next steps
Interested in learning more? Contact us to book an appointment to speak with one of our financial advisors to learn more and determine the right allocation for you.
We handle all the paperwork required to move all or part of your eligible 403b accounts and do everything necessary to maintain it on your behalf!
Accounts we’re unable to service
Unfortunately, SUNY ORP contracts aren’t eligible at this time. Please call our office to talk about alternative ways we can help.
