Charles Schwab vs. Employee Fiduciary: Comparing Small Business 401(k) Providers

The Charles Schwab Corporation (NYSE: SCHW) and Employee Fiduciary Corporation are both American-owned companies that provide 401(k) plans. The regulations concerning 401(k) plans are the same for all companies regardless of size. Therefore, when analyzing each company, it is important to view each company as a whole and compare the funds that are offered as well as the particular features of the funds.

Company Structure

The Charles Schwab Corporation provides services in four departments: investment, banking, trading, and wealth management. In November 2019, Charles Schwab announced its proposed acquisition of TD Ameritrade for a $26 billion all-stock transaction. According to CNBC, "the two firms will serve 24 million brokerage accounts, accounting for more than $5 trillion in client assets."

The Employee Fiduciary Corporation is 100% owned by the employees and focuses solely on retirement plans. As of 2020, Employee Fiduciary offers more than 30,000 mutual funds, services over 2,700 plans that are worth more than $2.8 billion, and covers approximately 75,000 clients. Each month, Employee Fiduciary processes $25 million in plan contributions and completes more than 500 distributions for participants.

The 401(k) plan is an employee benefit that many small business owners struggle to provide. The regulations are strict, and it takes a devoted staff to ensure that employees are receiving the proper amounts. Often, small businesses do not have the ability to provide dedicated staff, so they must choose retirement providers that offer assistance in monitoring the application of a 401(k) plan.

Comparing the Funds

Charles Schwab

As of 2021, Charles Schwab offers various plans for business owners. An individual 401(k) plan for owners with no employees; a SEP-IRA for owners with only a few employees; a SIMPLE IRA for businesses with up to 100 employees; a personal defined-benefit plan for owners with up to five employees; a business 401(k) plan for firms with an unlimited number of employees; and a company retirement account for businesses with established retirement plans.

Charles Schwab's main strength is its ability to reach a broad range of clients who have unique needs. Charles Schwab provides more than just retirement services, as wealth management is a large portion of the company's services. This additional service could be attractive to larger businesses that seek to minimize the number of providers with which they work. The way that Charles Schwab handles 401(k) plans is a major strength for the company because it can handle large firms as well as small businesses.

Employee Fiduciary

Employee Fiduciary is a smaller corporation and focuses on providing 401(k) plans for small businesses through 377 fund families. Employee Fiduciary is a small business compared to Charles Schwab. The size of the company, as well as the fact that it only provides retirement plans to small businesses, means that it can cater to its clients in a more personal manner.

Since Employee Fiduciary is a small business, its employees are well versed in the specific needs of other small businesses and are well equipped to provide advice. This strength is also a weakness, however, as Employee Fiduciary is in a niche market. The company is not equipped to provide services to large businesses and is limited to 401(k) retirement plans only while Charles Schwab offers investment advice, trading, banking, and wealth management.

Features of the Two Service Providers

Both companies provide reference material explaining the various 401(k) plans available and how the funds are managed. Each company offers telephonic and digital services. The Charles Schwab website offers tools to help clients make an educated decision, including IRA calculators, while the Employee Fiduciary website refers clients to third-party sites for the same calculations.

Deciding which company to choose depends on the individual needs of the client. Clients should feel comfortable with their retirement provider and the way their money is managed.

Article Sources
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  1. Internal Revenue Service. "401(k) Plan Overview."

  2. Charles Schwab. "Combined Firms Projected to Serve 24 Million Brokerage Accounts with more than $5 Trillion in Client Assets."

  3. Chamber of Commerce. "Employee Fiduciary 401(k) Review – 2020."

  4. Employee Fiduciary. "Our People."

  5. Charles Schwab. "Small Business Retirement Plans."

  6. Charles Schwab. "Form 10-K," Page 4.

  7. Employee Fiduciary. "401(k) Investments."

  8. Employee Fiduciary. "Calculators."

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