How to recommend SRI fund to company 401k provider?
October 19, 2014 6:18 PM Subscribe
I know about nothing about investments, but would like my 401k to be with a socially responsible investment (SRI) fund. I have an opportunity to recommend one or more funds to the 401k provider for the company I work at. I'm wondering about the best way to do it.
The 401k provider for the small (15 employees) company I work at gave a presentation on their retirement investment services. I asked her if they offered any SRI funds. She said "no", but would welcome recommendations from our company if we had multiple employees that were interested and the fund had a good history of performance. So I've been studying SRI funds. I think maybe I can get 2 or 3 people at the company interested in one, including the CEO. I'm really ignorant about what funds to pick and how to propose funds to the 401k provider. What should I be considering?
The 401k provider for the small (15 employees) company I work at gave a presentation on their retirement investment services. I asked her if they offered any SRI funds. She said "no", but would welcome recommendations from our company if we had multiple employees that were interested and the fund had a good history of performance. So I've been studying SRI funds. I think maybe I can get 2 or 3 people at the company interested in one, including the CEO. I'm really ignorant about what funds to pick and how to propose funds to the 401k provider. What should I be considering?
Best answer: I did this at my small company and it worked out fine.
The 401K provider was very open to the suggestion. I expected him to want something on the conservative side (e.g. an SRI index fund rather than something actively managed), but that wasn't the case. He pretty much focused on the performance history, and we chose a fund that I knew and that he had been aware of because it had very strong performance over the previous half decade.
401K plans most distinctly do not subscribe to the Bogle investment theory (invest in low-cost index funds; you won't beat the market). They tend to provide a range of investment options, including both index funds and more expensive actively managed funds. In my experience adding one or two SRI funds to the menu was not a problem at all. As long as the 401K provider can stay within the bounds of its fiduciary responsibility it is happy to offer investment options that will make its client happy.
For example, an increasing number of people don't want to be invested in fossil fuels. The presence of activist socially-directed investment options could even motivate some people to participate in the 401K plan who otherwise wouldn't. So I think this is a great thing for you to do, and it's great that you 401K provider has been receptive to it so far.
posted by alms at 7:46 PM on October 19, 2014 [1 favorite]
The 401K provider was very open to the suggestion. I expected him to want something on the conservative side (e.g. an SRI index fund rather than something actively managed), but that wasn't the case. He pretty much focused on the performance history, and we chose a fund that I knew and that he had been aware of because it had very strong performance over the previous half decade.
401K plans most distinctly do not subscribe to the Bogle investment theory (invest in low-cost index funds; you won't beat the market). They tend to provide a range of investment options, including both index funds and more expensive actively managed funds. In my experience adding one or two SRI funds to the menu was not a problem at all. As long as the 401K provider can stay within the bounds of its fiduciary responsibility it is happy to offer investment options that will make its client happy.
For example, an increasing number of people don't want to be invested in fossil fuels. The presence of activist socially-directed investment options could even motivate some people to participate in the 401K plan who otherwise wouldn't. So I think this is a great thing for you to do, and it's great that you 401K provider has been receptive to it so far.
posted by alms at 7:46 PM on October 19, 2014 [1 favorite]
ObDisclosure: I worked for an SRI mutual fund company for a couple of years, working as a shareholder advocate. My retirement savings are currently a mix of SRI funds, low-cost non-SRI index funds, and individual stocks.
posted by alms at 7:52 PM on October 19, 2014
posted by alms at 7:52 PM on October 19, 2014
I would pick SRI funds that have particularly good performance histories and returns (like some of the Parnassus Funds). There are other good SRI funds, but it's an easier sell when they would have made the cut even without the SRI angle.
posted by small_ruminant at 10:32 PM on October 19, 2014
posted by small_ruminant at 10:32 PM on October 19, 2014
I work in the SRI field. I think the answers above are good. If you want to do more research, US SIF is a respected industry group. Also the SRI Conference is coming up in November - you might find some useful materials or funds to research by looking at the conference agenda.
posted by aka burlap at 7:04 AM on October 20, 2014 [1 favorite]
posted by aka burlap at 7:04 AM on October 20, 2014 [1 favorite]
One other thing to keep in mind. Your 401K plan may not have access to every SRI mutual fund you are interested in, even they wanted to include it. So you should be prepared to be flexible in your choice.
posted by alms at 7:36 AM on October 20, 2014
posted by alms at 7:36 AM on October 20, 2014
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Another alternative to pushing for a change in investments available, take a look at the expense ratio on your potential SRI fund and compare against a non SRI fund. Invest in the non SRI funds suggested by the 401k provider and donate the difference in expense ratios (multiplied by your total investment) to a socially responsible charity every year.
posted by NoDef at 6:31 PM on October 19, 2014 [2 favorites]