✈ 401k Autopilot® FAQ

Frequently Asked Questions About
The 401k Autopilot™ Program

1. Are you airline pilots?
2. Why should I sign up for the 401k Autopilot® Program?
3. Why do you work with airline pilots?
4. I have investments I’ve held and dollar-cost-averaged into for years. Is there a downside to moving out of some of those positions now?
5. Shouldn’t I wait until the market is higher and my investments come back in value before I make a change? Or shouldn’t I wait until the market is lower to buy in at better prices?
6. Will I still be able to see my account online anytime I want to?
7. How do you make the changes in my account?
8. Do you manage money outside the 401(k) Plan also? Like IRAs, or other investment accounts?
9. What is the minimum account size to participate in the 401k Autopilot® Program?
10. What is the management fee for participation in the 401k Autopilot® Program?
11. What type of payment do you accept for the management service for the 401k Autopilot® Program?
12. Are your money management fees deductible?
13. Why do some other firms charge so little for money management?
14. Will you be able to take money out of my account?
15. Do you believe it is possible to "time the market?"
16. Will you guarantee a rate of return for my account?
17. How will I know when you make changes in my 401k account?
18. Who should definitely be a 401k Autopilot® client? (Take this quiz)
19. Do you hold my money directly?
20. Is my information confidential when in your care?
21. Which regulatory organization oversees and regulates Rhoads Lucca Capital Management?
22. I'm already retired, but I still have my money in the 401k Plan. I guess I didn't know what else to do with it. Can you still manage it there?
23. My question isn't listed above. How can I get an answer?

1. Are you airline pilots?

   No - never have been, either. As you can read on this website, RLC is an independent Registered Investment Advisor. We are independent of any connection to any airline. Our loyalty is strictly to pilots. This will not change.

   We do have a connection to your world though...

   John Rhoads got to try the American Airlines simulator at DFW years ago with a pilot friend (back when you could do that kind of thing) and managed to crash a jet twice and shear off a wing against a hanger before he slunk away in humiliation. He hasn't been invited back... we're sticking with money management!

2. Why should I sign up for the 401k Autopilot® Program?

   Clients tell us there are four primary reasons they choose the 401k Autopilot® Program:

   A. Lack of Time - The single most valuable thing each of us has is time, because it is limited and can never be replaced. For many people the busyness of life leaves little if any time for taking care of their investments. In fact, many people simply end up ignoring their investments and giving back their gains in every market decline. Using a professional manager whose only job is to manage your retirement savings accounts can be a great solution.

   B. Lack of Expertise - No one is an expert at everything anymore! (If it makes you feel better, realize none of us at RLC know how to fly an aircraft!) The great news is that professional help is available at a very reasonable cost. Rather than being frustrated trying to learn a whole new set of skills, it makes sense to immediately hire the expertise we need and have more free time.

   C. Investment Performance - Investors rarely achieve the investment performance they desire exactly because they lack time, expertise and confidence. The result is buying high and selling low or being paralyzed just at the moment when it is time to take action. A disciplined strategy, managed by a professional can help you achieve the returns on your investments that you need for success.

   D. Lack of Confidence - When all is said and done. When you've read and studied and learned all you can, someone still has to make investment decisions. Someone has to act. That's what we do.

   Beyond those four reasons, many clients just want to know that their account is being managed in a way that their future retirement is secure.

3. Why do you work with airline pilots?

   Rhoads Lucca Capital Management is a fee-only investment management firm, registered with the SEC as a Registered Investment Advisor. We were incorporated in 1980 – now in our 30th year of service. We’ve always had a focus on managing retirement money, which still makes up the majority of money we manage. These are the “piles of money” that have to last forever. Just by word of mouth and speaking in venues like the Federal Reserve Bank of Dallas, TX, the firm has grown steadily during these three decades.

   Since our first office in Dallas, Texas was so close to the DFW airport, it was inevitable we would begin working with airline pilots. At first, they came by way of referral from friends and neighbors who chose us to handle their money when they retired and liked what we did. Eventually, pilots referred other pilots to us.

   We noticed early on that a pilot’s 401(k) account made up a large portion of his net worth, but received the least amount of advice over the years. After airlines began doing away with defined pension plans and switching to defined contribution plans, we realized that 401k accounts and RSP Plans were really the most significant assets pilots still have under their control. Yet, at retirement, their 401(k) account was worth far less than it could have been worth and those retirees started retirement with less money than they could have had, if their account performance was better.

   When we evaluated our business several years ago, we decided we really liked working with our pilot clients and we set out to not only help pilots retire, but to get there with as much money as possible before age 60. That is why we offer the 401k Autopilot® Program for your 401(k) account. After starting with US Airways, the service grew to encompass professional pilots at Delta and Federal Express.

4. I have investments I’ve held and dollar-cost-averaged into for years. Is there a downside to moving out of some of those positions now?

   To be successful as an investor, the question you always have to ask is, “where’s the best place for my money today?” If that’s the fund you’ve been dollar-cost-averaging into, then keep it there. If it is in other funds, move it. If you’re worried about selling at the bottom, realize most funds will rise when the market goes up, but they won’t all go up equally. You want the strongest fund choices – not the ones you’ve dated the longest.

5. Shouldn’t I wait until the market is higher and my investments come back in value before I make a change? Or shouldn’t I wait until the market is lower to buy in at better prices?

   Wait for the market to go higher? Wait for your current investments to recover first? No and no.

   Here’s why.

   The bottom line is that your focus should be on where the best place for your money is today. It may take years for your money to recover while it’s invested in the wrong places. It may grow very quickly in the best choices.

   How about waiting for the market to go lower?

   How low is low? If the market goes up a few thousand points from here (as it surely will) will you look back on today and say today it was low and wish you had acted? The truth is we never know how high is high or how low is low. Our investment discipline (offense and defense) is built around the idea that we don’t have to know. Since no one has prophetic powers, it makes lots of sense to follow a discipline that protects your money in case the market goes lower and invests it in the best performing places in anticipation of the market moving higher.

6. Will I still be able to see my account online anytime I want to?

   Absolutely – 24/7. That won’t change. Once you hire us, you are also authorizing us to make the changes for you through the website, or the automated 800 number. In fact, we would like you to check your account regularly. But don’t change it yourself once you’ve hired us. That would work against your long-term goals. Relax! You’ve hired a professional team.

7. How do you make the changes in my account?

   We make the changes to your account through the website or by the automated 800 number on a best efforts basis. While you are giving us authority to carry out what you hired us to do, we cannot take money out of your account. We just tell them to move it from one place to another inside your account.

8. Do you manage money outside the 401(k) Plan also? Like IRAs, or other investment accounts?

   Yes. The majority of the money we manage is outside the 401(k) Plan. We manage money for a large number of people who are retired (retirement rollovers). We also manage IRAs, regular investment accounts, etc. Most Autopilot Clients transfer other accounts like IRAs or mutual fund accounts to us to manage. You can read about our full range of services on this website.

9. What is the minimum account size to participate in the 401k Autopilot® Program?

   The minimum total account size is $250,000. This can be a combination of your 401k account and any other outside investment accounts. The total value (your 401k plus outside accounts that you transfer to us for management) must be at least $250,000. Obviously, many clients have more than $250,000 in their 401k account alone. For them, transferring additional, outside investment accounts (other brokerage accounts, old 401ks from previous employers, IRAs, etc) is a way to obtain better quality management for their investment assets.

10. What is the management fee for participation in the 401k Autopilot® Program?

    There is a declining fee schedule based on account size. The larger the amount under management, the smaller percentage the fee for management. The fee is pro-rated by quarter. You will be charged 1/4 of your annual fee each quarter and you can cancel at any time. Fees are calculated based on the account value of your investments on the last day of each quarter. The complete fee schedule is included in the 401k Autopilot® Starter Kit.

11. What type of payment do you accept for the management service for the 401k Autopilot® Program?

    Check, credit card, or deduction of fees from an outside (non-IRA) account that is transferred for us to manage and use as a "billing account". Unfortunately, management fees cannot be deducted directly from your airline 401k account at this time. Despite this being legal, no airlines are making this option available to their pilots yet. Please contact the Benefits/Retirement Office for your airline and ask that this option be added to your 401k Plan. Professional management is an important benefit to help pilots be prepared for retirement and should be encouraged.

12. Are your money management fees deductible?

    Fees paid for money management services may be deductibe under IRS Code Section 212, which states that investment advisory and financial planning fees incurred may be deductible as miscellaneous itemized expenses to the extent that they exceed 2% of your adjusted gross income. Other miscellaneous itemized deductions which fall into the same category are fees paid for a safe deposit box, estate planning fees, tax preparation fees, attorney and legal fees, and more. We encourage our clients to ask their accountant or CPA about the deductibility of fees in the context of your overall tax picture.

13. Why do some other firms charge so little for money management?

    In every business, there’s a “low-cost competitor” competing on price alone to get attention. They know best the value they are providing for their clients.

    As the saying goes, "Quality, Service, or Price—Pick Any Two Out of Three." In choosing money management, it should be written as, "Offense, Defense or Price—Pick Any Two Out of Three." We offer an offense, a defense, quality, service and a fair price that is lower than value received.

    A Lexus and a BMW cost more than a Yugo. No apologies. They’re not the same. Greater value, higher price.

    As always, your decision should always be based not on cost, but on value you receive for the cost. This is your future retirement. If another firm charges less to manage money, but only provides you with an offensive strategy and no defense for tough times, there is a hole in the bottom of your boat. If you make money in good times, but give it all back again when the inevitable downtrends strike, is that what you want? To us, investment success is making it and keeping it. Our clients understand this value.

    We believe that Quality is Economy. Quality costs more on the front end, but lasts longer and provides a better experience in the long run.

14. Will you be able to take money out of my account?

    No. You are hiring us and authorizing us only to make changes within your account. There are only two ways money can come out of your account: A.) When you separate from service with your company and B.) When you take a loan. Both require you to fill out papers and a check is sent only to your address of record. Only you can take money out of your account.

    You are just putting us on your team to bring your investments to the next level. We do not have the ability to withdraw your money from your retirement account.

15. Do you believe it is possible to "time the market?"

    No. As an aside, if you ask anyone what market timing is, no one has an answer. The very fund managers who are in charge of each fund in your 401(k) plan all buy and sell securities throughout the year. We do the same. We recognize the cycles of planting and harvest in the markets and do the right thing for each. To us, market timing would be trying to anticipate turns in the markets and act before they happen. We don’t do that. We objectively measure the risk in the market, fund performance, etc. and act in a rational way based on what is happening now.

16. Will you guarantee a rate of return for my account?

    No. It is illegal for an Registered Investment Advisory firm to guarantee returns. Instead, we devote a full-time effort in creating and executing investment strategies that we believe will help our clients reach their goals.

17. How will I know when you make changes in my 401k account?

    We will send you regular communications by email and by mail. Your 401k Plan administrator will continue to send you confirmations of all trades and all activity in your account as well as quarterly account update statements of account value. And of course, you can access your account online, as always.

18. Who should definitely be a 401k Autopilot® client? (Take this quiz)

    Take this simple quiz to see if you’re a good candidate for the 401k Autopilot®. Check off any or all of the following that apply to you – and be as honest with yourself as you possibly can. The more you check off, the stronger the fit:

    1. ___ Do you often forget to make the needed changes to your 401(k) account?
    2. ___ Are there other things in life you would rather do instead of being tied to watching the markets? Golf, fish, vacation, family, whatever?
    3. ___ Do you ignore, dislike, or procrastinate taking action to maximize your 401(k)?
    4. ___ Have you experienced confusion, immobilization or discouragement from working with your 401(k)?
    5. ___ Do you have other investments scattered around with no definite overall plan or strategy to reach your retirement goal?
    6. ___ Have you managed your money yourself and lost serious money? Have you rationalized losing it by telling your spouse, “everyone else lost money?”
    7. ___ You have a strong sense that time is moving you towards retirement, but feel you aren’t ready financially yet? And you’d like to start moving ahead?
    8. ___ You’re busy, but you long to simplify your life and reduce stress?
    9. ___ You want to go to the next level of real money management instead of generic advice?
    10. ___ When it comes to making timely buys or sells in your account, do you sometimes find yourself paralyzed – unable to pull the trigger?
    11. ___ Do you want to improve your odds of a successful outcome with your 401(k)?
    12. ___ You lack the experience to properly measure and manage risk.
    13. ___ You lack the time to gather information and monitor the markets on a daily basis.
    14. ___ You lack the experience to take appropriate action when necessary.

19. Do you hold my money directly?

    Absolutely not. Your funds never leave your individual retirement account. You are giving us limited authority to invest and periodically change to different investment options within your account.

20. Is my information confidential when in your care?

    Yes. We recognize your private information is highly confidential and we take this preserving your privacy very seriously. By law it is illegal for us to disclose your private information to anyone but you directly, or your other financial advisors (attorneys, accountants, estate planners) with your consent only. We insist you place this instruction in writing for our files, when you request it. In certain situations, a court can order the disclosure of information to the court.

21. Which regulatory organization oversees and regulates Rhoads Lucca Capital Management?

    Rhoads Lucca Capital Management is a Registered Investment Advisory Firm, regulated by the Securities & Exchange Commission.

    To verify the firm’s status as a Registered Investment Advisor Firm, you may follow this link to the Security and Exchange Commission’s website by pasting the following link into your browser: http://www.adviserinfo.sec.gov/IAPD/Content/Search/iapd_OrgSearch.aspx

    By doing this, you will be able to view the most current registration Form ADV that is filed by our firm.

22. I'm already retired, but I still have my money in the 401k Plan. I guess I didn't know what else to do with it. Can you still manage it there?

    Yes. You can still participate in the 401k Autopilot® Program. We would advise you though, to roll your 401k account into an IRA in order to have greater investment selection and more portfolio management options. This is something we should discuss personally with you.

23. My question isn't listed above. How can I get an answer?

    Please email your question to us at information@rhoadslucca.com, including all relevant information. If you need immediate assistance, you can always call us at 888.895.212 or 214.373.9771