How to Talk to Your Retirement Plan Manager

401(k) Toolkit for Working with Your Financial Advisor and Employer-Sponsored Retirement Plan Administrator to Offer Fossil Free Investing Options

So what’s next?

OK - you've used Fossil Free Funds, looked inside your retirement plan mutual fund holdings, and have determined that you want to make some changes.

Sustainable, Fossil Free 401(k)s: A How-To Guide

How sustainable and fossil-free are your 401(k) fund choices? Your 401(k) portfolio could be an engine for more positive impact. Join Fossil Free Funds and HIP Investor for a webinar to learn how to advance your employer-sponsored retirement plan to reflect more sustainable fund choices that are better positioned for a future world of cleaner, greener energy – while seeking lower future risk in your portfolio.

Download the webinar slides

If your investments are in your employer-sponsored plan at work

It is possible to change what the plan offers, but it will take more effort than if you have an IRA or a personal investment that you solely control (see last page for more on this). You will need to engage the plan administrator to help find the right blend of funds to satisfy the many employees that all invest in the same basket of mutual funds. This may take time and possibly some coordination with your co-plan participants.

Americans have $4.4 trillion invested in 401ks

Step 1 – Talk to your colleagues and build a coalition

To effectively advocate for new offerings through your employer-sponsored plan, first build a coalition of peers and interested co-workers inside your company. Your voice will be much stronger as a group. If you’re writing to someone in power, advocating on behalf of 10 or even 20 people carries a lot more weight than just one. One way to spur interest would be sharing the results from your Fossil Free Funds search among fellow employees. This can be done using social media available on each page of the site. All plan participants are offered the same basket of mutual funds as you are, so they are probably asking the same questions right now. It will certainly make interesting conversation over the water-cooler.

Some companies have “green teams,” and there may be affinity groups for women or LGBT employees, and if there isn’t one already, it may be time to create one for climate change. Communicate with your co-workers through a company intranet, employee portal, a company newsletter, corporate chats, or social media. The herd is heard!

First, build a coalition of peers and interested co-workers inside your company. Your voice will be much stronger as a group.

Step 2 – Identify the best people in the company to speak with

The 401(k)/403(b) plan administrator, manager, or coordinator should be known if you are a plan participant, and that’s where to start. There could also be a chief sustainability officer or employee engagement manager, and those could be good resources. An effective method is to go to the LinkedIn pages of those people and find who might have some sympathy for the cause. Do any of them volunteer or have connections with organizations concerned with climate change? Look for indicators that they’re friendly to sustainability and start contacting them in order of their friendliness. In a publicly listed company with more structure, a coalition is vital to signal to managers that it’s an important issue for many employees. If it’s a smaller company, the CFO or CEO could be approached directly. In a mid-size or family company, a family member could be more influential.

Step 3 – Bring a solution to the table

The usual starting point in these conversations is: “We want to reduce the future risk of our 401(k) fund choices. We also want to invest in a clean energy future. How can we enhance our 401(k) choices to do so?" Here are the criteria. Getting three new fund choices added to the list of the existing 15-30 is a formal process, and could take a year to be added. Larger companies often have some form of investment committee, which engages an investment advisor. There may be some funds in your plan that you see contain only one oil or coal company. You could ask the plan administrator to call the fund manager and say, “Is there a substitute for this one fossil fuel company? If you made one change you would be fossil free!”

If the investment advisor and plan administrator refuse to help in swapping out some fossil heavy funds for some fossil free funds, you may need to get fellow employees to sign a petition requesting the change and send it to the investment committee. If you are told, “But you’ll make less money if you’re not invested in oil.” You can say, “Actually oil is very risky these days. We want to diversify, and be part of the clean energy future.”

More than 91 million Americans have retirement plans invested in mutual funds

If you’re an individual investor

It’s much easier to divest and reinvest; it’s your money, and your financial advisor works for you. You just need to have a meeting to discuss what you have learned about your holdings and how you would like them changed to align with your values. An investment professional will advise you of potential risk and you can make your own decisions.

You can trade your own portfolio, or tell your manager to do it. They may push back and tell you that you’ll make less money. Again, you can reply, “Maybe, but it’s my money, I want less risk, and fossil fuels are risky business – look at coal.” Your financial advisor wants, and it’s their job, to make you money, so you should drive home the point in no uncertain terms. Ask for help finding the best choices. The advisor may say no if you tell them to invest in a specific fund because it has a short or rocky history, so you may need to be patient as they find a better alternative. The goal is to remove the risk, not a specific fund; focus on risk, especially future risk, as well as returns. If they’re being lazy or unwilling to help you with this transition, find a new advisor. If your broker is tied to a big-name brand, they may only be able to offer products that the particular company has approved. If you want innovation, you might need a new advisor.

Acknowledgements

Thanks to R. Paul Herman, founder and CEO of HIP Investor which rates 401(k) plans for fossil free and sustainability, for his assistance in writing this toolkit and to Rob Thomas of Social(k) and Timothy Yee of Green Retirement for reviewing it.