Re:Reddit's Stock Threads Become a Must-Read on Wall Street
by gravitas on Sunday October 11, 2020 @12:26PM
(#24746902)
I think the USA is sort of the same, my experience is layperson so I don't know if this is typical or normal: the company itself pays a fee to the vendor to maintain your 401k account under whatever the 401k legalities are (taxes being deferred etc.). A lot of time the funds available to choose from are the "institutional" kind that us mere mortals can't buy, only large vendors. So our money is pool-leveraged at scale using techniques and funds we individuals cannot access.
When you leave that employer, you can leave your 401k at that vendor but after awhile the old company starts to bug you about moving it as it's costing them money to maintain an account for an ex-employee. I missed that subtle point you noted - most companies (? all?) only match contributions to their vendor 401k, so there's our internal-company incentive to get you onto their plan to get those sweet, sweet matching dollars.
In Canada our 401k-equivalent is the Registered Retirement Saving Plan (RRSP). Most companies have something similar to what you describe in that they hook up with a financial services company and do contribution matching. That company has certain offerings, either mutual fund (often fees/MERs > 1%) or if you're lucky perhaps ETFs nowadays.
I frequent /r/PersonalFinanceCanada and semi-often we get people asking which of the offered mutual funds should someone buy. The general consensus is that for most people to choose the funds that have the lowest fees and closely match a equity or bond index: pick a bond percentage weighting that generally let's you sleep at night.
When you leave a job you can often leave the money with the financial company, but it's often easier to do a liquidate-and-transfer to a 'central' RRSP account if you hope around a lot.