The Bespoke Portfolio service, is a digital investment advisor built into the recordkeeping system of Slavic401k. This service provides a recommend deferral rate and perpetual investment allocation for the life of the participant.
To determine the recommended deferral rate, the algorithm takes into account the following assumptions; A withdrawal rate of 5% is assumed when the participant reaches age 65. The inflation rate applied to projected salary and social security benefit, along the retirement path, is 3%. The salary is expected to increase at the rate of 3% per year. The equity portion of the account balance is assumed to earn a return of 7% per year, and the fixed portion is assumed to earn a return of 2.5% per year. The mathematical model used in the algorithm was created by Dr. Dragan Radulovic, Ph.D Mathematics. There is no guarantee of future returns.
The asset allocation algorithm utilizes the prudent investment allocation rule, "rule of 100," adjusted for life expectancy (currently 115) and the participant's answers to a suitability and risk profile questionnaire. The algorithm utilizes a point system to adjust the equity to fixed income ratio based upon the participants liquid net worth plus income, answers to a personal risk tolerance test, and retirement date. The program creates a unique portfolio per individual rebalanced annually. On or about the participant's birthday, he/she will receive an email asking if any life changing circumstances have occurred that may alter their risk profile. If so, a link will direct them to the Bespoke website to update their profile so that their account will be reallocated accordingly. If not, their account will we reallocated and rebalanced according to their age change
The ultimate asset allocation for each participant is a subjective calculation generated by the algorithm. The equity to fixed income allocation is displayed with a potential "risk of loss" estimate to ensure that the participant is comfortable with the level of risk recommended by the software. Participants must accept the portfolio to confirm the allocation or opt out. There is no human involvement or oversight in the ongoing management of each individual account. Outcomes cannot be guaranteed and there is the inherent risk of investing in the stock and bond markets.
SMF provides the optional Bespoke service under its contractual role as an ERISA 3(38) Fiduciary and is solely responsible for the investment line-up and allocations. The service is provided at no cost the first year.
|Account Balance||Service Fee|
|$0 - $100,000||0.25%|
|$100,000 - $250,000||0.15%|
The program will allocate accounts amongst broad market index funds with low expense ratios. There are not guarantees of future returns.
|Fund Allocation||Fund Expense Ratio as of 3/1/2017|
|BlackRock Total Stock Market Index K Share (BKTSX)||0.03%|
|BlackRock International Index K Share (BTMKX)||0.07%|
|Fidelity Total Bond Market Index (FSITX)||0.05%|
|Vanguard Short Term Inflation Protected Index Fund (VTAPX)||0.08%|