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Before starting MPower Co, I worked for the Financial Industry Regulatory Authority also called FINRA. FINRA is a quasi-government entity tasked with regulating broker-dealers within the United States. FINRA does a lot of different things from testing investment professionals to auditing them, monitoring trading activity, and more. One of my favorite things, though is that FINRA provide investors with a number of resources and tools to be better decision makers when it comes to investing. My favorite resource is the FINRA Fund Analyzer

FINRA has a resource page on how to use the FINRA Fund Analyzer, if you are having trouble navigating the system. 

This Post is Not Investment Advice

Through writing this post, I am not giving you investment advice. Your goals, investment experience, and more, are things that I do not know. I am simply writing this article to encourage you to use FINRA’s Fund Analyzer to make informed investment decisions that fit your needs. I’ll walk you through how I use the information it provides to make informed decisions. This article is intended to be educational in nature and not investment advice. 

I Use the FINRA Fund Analyzer Personally

My spouse worked for a Kansas City based company at the start of 2021. The company was sold to another non-Kansas City based company last spring. As a result of the company being bought, Mark now works for the non-Kansas City based company. The reporting structure changes, and business changes didn’t occur, though, until January 1, 2022. 

This means that as of January 1, 2022, Mark became eligible for employee benefits under the non-Kansas City based company. So, on January 1, 2022, our insurance coverage changed, Mark’s place of work officially changed, and finally, so did his employer-sponsored retirement plan. 

The investment company his 401k is through changed. Therefore, we needed to elect which investments we wanted his contributions to be invested in. We found that his company had 33 approved investment vehicles within his 401k. Most were index or mutual funds but there were a few bond fund options as well. 

I sat down one evening and in 30 minutes compared the investment options within the FINRA Fund Anlayzer, and chose which investment option mix was the best for our situation. I now feel confident in the investment elections we made. 

I would not recommend the FINRA Fund Analyzer to you, if I did not know that the information you are provided is reliable and I did not find it valuable. 

Contributing to an Employer-Sponsored Retirement Account

At MPower Co, we highly encourage and recommend the use of employer-sponsored retirement accounts (401k, 403b). Why? Several reasons. 

First, because there is typically an employer match involved if you choose to contribute to the plan. Walking away from this match is like turning down a raise that you don’t have to ask for or do any more work to receive. 

Second, the more you can automate saving and investing, the more you are likely to save and invest. Having funds directly contributed to your retirement plan on your paydays saves you having to take time and energy to choose over and over again that you want to prioritize your retirement years. 

When you started your employment with your current employer you had a chance to enroll in the sponsored retirement plan. If you are not currently enrolled, you will be eligible to enroll during your employer’s next open enrollment period (typically in October or November). 

Set Up Automatic Contributions

You can enroll in an employer-sponsored retirement plan, and not set up automatic contributions to it. To effectively be saving, you need to elect to have contributions made to your retirement account. You can change how much you are contributing at any time – you don’t have to wait until enrollment period. 

MPower Co recommends that at a minimum you contribute enough to be eligible for the full match of your employer. For 2022, the maximum total contributions you can make to your employer-sponsored retirement account is $20,500. The closer to that number you can get the better; however, know that for most of us that number isn’t realistic. Shooting for 10% of your income is a good base-line goal, but 15% or 20% is even better! 

If you are just starting to invest for retirement, start with 10% today and then each time you get a raise and/or on your work anniversary, increase that by 1%. Small steps like that can really add up in the long run! 

Know Your Investment Options

Now that you are contributing to the plan, you need to tell the investment company how to invest those funds for you. You need to make your investment elections. 

This may feel overwhelming, but that is why this article is the perfect place to gain confidence! You can make these elections yourself. If you read this and still don’t feel confident, I’m going to give you information at the end on how to get support on making elections without having to pay a dollar to get them! 

Your employer has what is called a 401k Committee. It is likely made-up of people in HR, Finance, and Compliance personnel, if you work at a large company. It is their job to work with the investment company that sponsors your plan. They review the overall plan you are offered by your employer and approve which investments you are able to invest in through your plan. In reality, it is the investment professional that they work with that chooses which investments you are offered. 

The first step in choosing your investment options is knowing your “approved investment list.” You likely can find this electronically when you log-in to your account for your employer-sponsored retirement plan. You can also ask for this list from the person responsible for managing employee benefits (i.e. likely an HR representative). 

Once you have this list, you are ready to dive into the FINRA Fund Analzyer. This tool will compare each of the approved funds on your list. FINRA gets daily feeds of information on funds and updates this tool daily with that information. So, it is up-to-date. 

You are basically going to compare all of your approved options. Mark had 33 approved options and it took me less than 30 minutes to compare all 33. So, this is not overly-time consuming! 

4 Things to Look for When you Review Your Investment Options in the FINRA Fund Analyzer

Once you are in the FINRA Fund Analyzer, there are four things that I think are critical to review. There is a lot more information in the system than what I’m going to go through in this post. This post is all about keeping it simple. You can dive further into making your selections; however, I think this is the most crucial information to review for making an informed and empowered investment decision in your employer-sponsored retirement plan.

1. Fees

Research has shown over and over again that the lower the fees are to you, the more your invested funds will return over the long-run. This makes logical sense. The more money you have invested, the more money there is to compound. Even if the investment doesn’t get the highest return, you have more money working for you. 

So, the first place I start is by comparing investment fees. I put three index funds into the fund analyzer to compare the costs. Across the board the fees are extremely low for index funds, but you can see here that if I was comparing the fees for one index fund over the other, I would lean towards the one to the right based on the fee amount. (I’m not giving you which index funds these are, because 1 – your plan may or may not offer this specific investment and 2 – again I’m not making investment recommendations to you, simply helping you use the FINRA Fund Analyzer). 

2. Consider Diversification

You may get to the end of your review of options, and think that there are three or four investment options that have pretty low fees. Compare their investment mix. Do they overlap the type of companies they invest in? In this “style box” below, there are two that are in the Large-Blend category and one in the Mid-Blend category. 

For most practical purposes, A and C are investing in similar or likely the same companies. Splitting your funds between the investments is likely a bit redundant. So, then going back to the fees and seeing if one is lower, would likely rule one out. 

3. Projected Return

In the FINRA Fund Analyzer there is a calculator that gives you the projected returns of the funds you are comparing. It is assuming you are investing $10,000 at 5% (which is low – the historical rate is closer to 8%) over ten years to give you a value. The following is an example of three options. I’d like to have over $16,000 instead of just less than $14,000 after ten years. My guess is you would, too.  

Screenshot of the future value output in the FINRA Fund Analyzer.

Know that if you were to invest the $10,000 today, your results would vary from their projection. But it is a good tool to illustrate side-by-side if the market does the same thing for the investments within each fund, what the results would be. Actual results will vary from the results projected by the FINRA Fund Funalyzer. 

4. Past Performance 

Past return is no guarantee of future performance. Things can change very quickly in the investment world based on external factors; however, I do pay attention to this information to inform my decision making and am recommending you do as well. 

This following image is an example of two options on Mark’s approved investments list from the FINRA Fund Analyzer. I was looking at two options that were significantly similar. They were both index funds with the same fee structure. The only difference is one only invested in the 500 largest companies in the U.S. The other invested in all listed U.S. companies – i.e. tracked the market more directly. As I was interested in investing in one (there is no point to splitting money between the two since they are so similar), it came down to the investment returns. 

The investment fund on the left consistently had better returns than the one on the right. To be clear, I’d be happy with the returns of either column, but I chose to go with A because it has a track record for out-performing B. 

Screen shot of historical returns as it appears in the FINRA fund analyzer.

Document Your Elections to the Investment Company

Once you have whittled out the funds with high fees, projected returns, eliminated funds because they are too similar in investment type, and have reviewed the historical investment returns. You have hopefully narrowed down your investment selections to one to four options. 

Reviewing Mark’s options it was clear to me there was only one best choice. So, that’s what we went with. 

Once you have selected how you want to invest, you have to notify your elections to your investment company. You can typically do that electronically. Ask your employee benefits person for support if it is not obvious to you how to do this – every system is different so giving you pictures for one company is not going to be helpful. 

Two Final Thoughts on Reviewing Your Employer-Sponsored Retirement Plan Options

That was a lot! If it still feels overwhelming to you to select your own investments using the FINRA Fund Analyzer, you have free resources available to you through your employer to get support. Your employer has a relationship with an investment professional that will help guide you through your investment elections at no cost to you. Work with your employee benefits person to get connected. 

My last, and perhaps most important thought: Never pay someone to actively manage your employer-sponsored retirement account. If someone is going to charge you a management fee or an advisory fee on your employer-sponsored retirement plan, they are not acting in your best interest. They are unnecessarily increasing your fees related to your account. This goes back to point No. 1 above that how much you pay in fees matter. The ability to actively manage an employer-sponsored retirement plan is highly ineffective. Switching mutual funds and bond funds regularly is not a sound investment strategy. So, walk away from anyone that is going to try to actively manage your employer-sponsored retirement account. 

Did You Like this Article? 

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If you are ready to continue reading about investing, perhaps this article on how to start investing would be of interest!