Principal Financial Group IRA Review

 Principal Financial Group as a 401k administrator

I recently started with a company that uses Principal as its 401K admin. I knew trouble was afoot when I started reviewing the funds in which I was going to invest my 401K contribution.  All the funds are 'private', i.e., not regulated by the SEC, and they do not provide a prospectus (nor offer much information about the funds). The pool of funds is small - about 2-dozen. No money market funds. One fund is a real estate fund that has a history of refusing sell orders until months have passed. The expenses for their funds are 2-3 times higher than comparable funds administered by another well-known 401K admin company.

One bond fund they run hijacks the name of a retail bond fund that pays dividends. Their version of the fund with the same name does not pay dividends. Dishonest, misleading - I don't know which. 

The reporting available on the 401k website is horrible, e.g., it's extremely difficult to review what you paid for a share of any fund in the past (and their website is the only source for this data). I finally figured out you have to display a graph of the fund's share price and then click on a point on the graph's price line corresponding to the date for which you want a price. A request to simply provide a table of historical prices for the funds was answered "We have no plans to change our reports". 

The "current balance" and "activity" reports are equally cumbersome to use. It's very difficult to simply harvest transaction records off the website for the purpose of running your own charts. For example, they insert daily "transaction" records recording how much you have "lost" or "gained" based on the increase or decrease of the price of a share in the funds in your portfolio. Stuff like this is noise - proper transaction records should simply show contributions and purchases, their source and which fund's shares were purchased 

Principal.com customer service reps are friendly, but generally incompetent to answer questions (an exception is the Princor brokerage reps - they seem knowledgeable and provide fairly accurate answers immediately).  Each time I've called, I get "we'll need 2-3 days to research that". About 1/2 the time, a return call never comes. For the times I have received an answer, it has turned out to be wrong about 1/2 the time. I managed to exchange a few e-mails with the CSR manager. He ended the exchange with a form letter that primarily described what a 401k plan is for (!??). I guess they don't have much in their arsenal they can use to mollify dissatisfied customers. 

In an attempt to invest in funds other than their small pool of private funds, I opened one of their Princor "self-directed brokerage accounts".  They charge $75/year and $25/trade to use it - another rip-off (almost $675 per year if you trade each payday).  For the funds you can trade in, they don't honor the prospectus, e.g., they set their own rules for minimum purchases for 2nd and subsequent purchases. When I called and asked where these rules were published, I got the old "we'll need 2-3 days to research that". 

The "seam" between Principal and Princor is obvious. I won't get into the difficulty of reconciling transaction records from the Principal 401k website and the separate ones on the Princor website, but, doing so is very hard. 

I documented a comparison to another 401K admin company, talked it over with my company's mgmt and they agreed to research the other 401K admin company to determine if we should switch to the other company. I sure hope they fire Principal and select the other company! 

Principal may be the "largest", but, in my opinion, they are the worst.