Why are businesses rarely offered precious metal mutual funds by their 401k management company?

Even in mutual fund market, precious metals are very high risk and may burn even very savvy fund managers

I’m in the business. I am independent. Here’s why they don’t. Keep in mind this is my opinion based on my experience.

Prior to 1990, or thereabouts, there was no such thing as mutual funds in 401k plans. Plans were managed by professional asset managers the same as your state pension plan, the same as large corporate pension plans, the same as endowment funds. Big money hired experienced talented professionals to manage their money. Prior to 1990, the 401k business was pretty small potatoes and, with few exceptions, the only options for the small plans were a bank trust dept or a brokerage firm. The bank was the best choice at that time. They did provide at least mediocre management.

Around 1990, the mutual fund industry figured out that 401k plans would be a great place to sell mutual fund and took the industry by storm. Neither plan sponsors (your company) or providers had the faintest concept of fiduciary responsibility.

With that as a background, here is what happens today. Selling mutual funds still reigns. Not only the client be damned (thats your company), but the participant (you) be damned to Hell.

The 401k providers are lining their own pockets first and taking care of themselves first. Second, 401k providers seek to satisfy the company who is their client, not the participant in the plan. They really don’t give a damn what you want. It’s all about what the provider wants and what the company (sponsor) wants.

The provider assumes no responsibility for any fiduciary liability. That means they don;t have to work solely in your (the participant) best interest. They are permitted by law to put their own interest first.

Any suggestions you might have, say for gold funds, is simply a distraction to them and they justify it by saying its too risky. They themselves do not have the slightest idea what funds would be best and are not permitted to give you any advice on fund selection. If they gave you advice (which their company prohibits) the company would be assuming fiduciary liability, which would make them responsible for investment results…which would detract from them selling more mutual funds.

Case closed and don’t bother us with any bright ideas that you think you have.

What I am telling you here is based on behaviour that I have seen over the years by 401k providers and numerous plan sponsors.

It is allowable, assuming your plan document permits (and if it doesnt, it could be modified) to have an account in which you can buy anything you want and are not limited to the funds that are on the list. Whether that could be done depends more on the amount of money in the plan rather than the number of employees. If the plan balance is less than $5million, forget it.

If the plan balance is at least $2million there are other options that the provider is not going to tell you about. At that level you can get a professional manager to manage all of the assets and most good professional managers have had gold in their portfolios over the last few years. So your idea was great. You’re just in a typical 401k that puts you last in line for the goodies.

thanks @plethora,I knew there was someone out there that knew the game, I am going to make sure this doesn’t continue-its absurd.

and, so utterly cowardly, the only firms that really ever ultimately make the big money are the ones that oftentimes take the alternative big risk, ones willing to stand out from the pack, and it has been that way since time memorial, a few come to mind LOL.
Not to say they ultimately won’t get gobbled up and distributed in a most inelegant way.

@Garebo You have all the rights and should not be shy about making your desires known. Put it in writing. The most achievable solution may be to request that the plan sponsor (your company) establish an investment advisory committee made up of selected employees (you being one, of course) and selected officers of the company to review regularly matters including selection of investment choices. Under this arrangement, the committee could easily have included a gold fund with accompanying cautions about the risk level. But you would have had what you wanted. This is an effective way to remove the provider from the role of selecting funds (which they usually dont want to do anyway). They don’t get paid for selecting funds.

Sir, you have been most informative.
I almost want to cut and paste what you say and send it to her. Don’t worry, I will present it to her in my usual caustic way, with some backing from allies of course, and hopefully get the job done in our favor.

@Garebo Just came across your question again and wanted to give you one more reference as there was a US Supreme Court decision in January 2009 of which you should be aware. The link I am giving you is to a law firm, but their explanation of the decision is very much in layman’s terms. Take a look This is a monumental decision. Prior to this decision,as noted herein, any loss had to be a loss to the plan as a whole. This decision changed that, as you will read.

It is now hazardous to a trustee’s financial health to fail to take note of employee/participant request for changes in the plan. Note that 99% of requests can be discarded as many of them are just silly. But a request for inclusion of an investment class is not silly. It’s a legitimate request assuming you have good reason and can clearly explain what you want and why.

Thanks, I will definitely pursue this as I earlier expressed. My feeling still is of anger, for a great portion of this opportunity has been lost- 3½ years and you can do the math, it’s just the ignorant ego of these people that drives me mad.
However, I still feel gold, please don’t laugh too hard…5K, maybe I am the ignorant one-will see. Reality check in 2012, if you’re still around, please remind me after the Mayan meltdown, lol.

Who knows. While I know what I know about 401k plans and the best investment platform and a good grasp of the liabilities associated there with, picking a winning asset class is beyond me. Quite frankly I think it is beyond anyone, just to pick the right class at any given time.

I do think (layman talking here) that gold is good to hold, but I hold the metal, coins. If I am going to put money in gold I want the maximum inflation hedge and thats what the metal is.

The problem with owning a gold fund is that you get to take advantage of any market rise, but since a mutual fund is still dollar denominated, you get minimal advantage as a hedge against inflation.