Last week we opened the book on BNY Mellon's 401(k) to see how their own plan was performing in light of a new investment management leader.
At first glance, it looked like assets had grown by more than $1 billion (125 percent) in one year. That's an impressive margin by any standard, but obviously not the whole story.
It turns out someone made a $1.1 billion transfer into the plan. Before anyone suspects foul play, a cursory examination of BNY Mellon's older savings plan shows an identical amount being transferred out of that plan. Out with the old, in with the new.
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Ignoring the $1.1 billion transfer, the plan still shows a 36 percent rate of return. But again, we still don't have the whole story. We're interested in how well the plan's investments did, not how much money showed up out of thin air. That means we can discount transfers, ignore contributions made by the employer and participants, forget about the loans and forget about grandma's $12 birthday check.
The actual line items and methodology used to do this remain a trade secret protected by our parent company, Judy Diamond Associates, as part of their Diamond Metrics system, but hopefully I've given you an idea about where to start.
What I can tell you is that the BNY Mellon 401(k) plan ran with an 18.26 percent rate of return in 2009.
That's below the national average for large 401(k) plans – 21 percent – and well below the S&P 500's 27 percent RoR.
Of course, just because someone works for a company like BNY Mellon doesn't mean they're automatically going to excel at retirement investing, any more than someone who works at Boeing is going to be a great aerospace engineer.
Any advisor with the wherewithal to phone BNY's head of HR would certainly have a leg up armed with this information.
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