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Investor Advice Proves Valuable for Solo 401k Plan

investor advice solo 401k plan

A recent Charles Schwab SDBA Indicators report shows that Solo 401k individuals who receive advice from an investor perform better than individuals with non-advised plans. According to Mike Peterson, director of corporate public relations at Schwab, individuals who receive investor advice “will likely have more diversification in their holdings and advisors are likely to frequently rebalance clients’ portfolios.” In fact, advised Solo 401k accounts have a total of 10.3 average trades vs. 5.6 for non-advised accounts, according to the Schwab report. The report surveyed approximately 137,000 participants, ranging from Baby Boomers to Millennials.

IRA Financial Solo 401k

The Solo 401k is a popular retirement plan among small business owners with no full-time employees, and self-employed individuals, including freelancers and sole proprietors. The plan is so popular due to its features, which include the highest maximum contribution among any retirement plan; a penalty-free $50,000 loan (or 50% of account value); the ability to invest in both traditional and alternative asset investments and its easy administration.

When you establish a Solo 401k plan with IRA Financial, you receive free consultation with an in-house specialist regarding Solo 401k rules. These include UBTI and UDFI rules, IRS approved prohibited transactions and disqualified persons. Your in-house tax specialist will assist you in completing IRS Form 5500-EZ and provide free and unlimited consultation to help you avoid triggering a prohibited transaction.

However, IRA Financial is a non-fiduciary. In other words, we do not provide any investment advice, such as recommending investments to buy. This is why it is important to perform due diligence when investing with a self-directed retirement plan. We will work to make sure your plan is IRS compliant and help you avoid triggering a prohibited transaction. You can review our Solo 401k services here and get a free consultation with a tax specialist if eligible for the plan.

How to Choose a Financial Advisor

Because Solo 401k retirement investors perform better with financial advice, we will help guide you on what to look for in a financial advisor. After all, this is someone who will work with you for many years, so performing thorough research on this person is crucial.

If you are specifically looking for investment advice, you will need to find investment advisory services. This is a financial advisor who will assist you in managing your investments and tell you what type of investments you should purchase specifically for your retirement plan, in this case, the Solo 401k. You can also gain advice from investors in areas such as retirement income planning and financial planning.

Find an Advisor with Reputable Credentials

There are credentials and there are reputable credentials. What’s the difference? Credentials can be purchased and ultimately provide no history on the financial advisor’s experience. Reputable credentials are earned, generally after years of study and passing multiple exams. When looking for a financial advisor for investment management for your Solo 401k plan, make sure they have a CFA designation. CFA stands for Chartered Financial Analyst and shows that the advisor underwent years of study to earn this designation.

Perform a Background Check

It is important to find a financial advisor with reputable credentials but continue your research from there. Research them through an organization they’re associated with to see if they have complaints on their record. A formal customer complaint is viable in helping you determine whether this is the financial advisor for you, or if you should continue your search. It’s important to note that it’s common for a financial advisor to have a few complaints, particularly if they have worked in the industry for many years. Too many complaints is another story.

You can also search the financial advisor’s background through BrightScope, a financial information and technology company that has a comprehensive public directory of financial advisors.

Ask Questions

When you find someone who looks good on paper, sit down with them and ask questions to ensure their experience aligns with your investment interests. When speaking with the investment manager, look out for the following criteria:

  • Are they a good listener?
  • Do they ask a lot of questions?
  • Do you know how they manage investments – are you comfortable with their approach?

Finally, is this a person that you like and can trust, who has your best interest at heart? If you have even the slightest doubts after meeting with an investment advisor, it is best to continue your search.

Succeeding with the Solo 401k

The Solo 401k is a unique retirement plan that offers many opportunities for retirement success. It allows you to make alternative asset investments and traditional investments to truly diversify your retirement portfolio. And of course, it allows you to save more for retirement with its high annual contribution limits. Self-Directed retirement plans give you freedom, but to a great extent, they can be seen as a  “do it yourself” retirement plan. If you want the counsel of a financial expert, make sure you review their credentials and work history beforehand. It is also important that you feel confident this is the person to offer investment advice. This can take a lot of time, but in the long run, completely worth the endeavor.

Questions About the Solo 401(k)?

If you have questions about the Solo 401k plan, get in touch with IRA Financial directly at 800-472-0646. Our tax and ERISA specialists will be happy to answer any questions you may have whether you are a Solo 401k account holder or interested in establishing the plan.


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