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401(k) Stories

The days when RIAs were the outsiders at the 401(k) party are fast coming to a close. What's new is that the mass of 401(k) assets is getting critical at about $3 trillion; fiduciary advisors are getting appreciated; fat fees and questionable kickbacks are getting exposed and stepping out of line is getting dicier as the Department of Labor tightens the regulatory screws.

The old reasons why the 401(k) business is attractive are still in place: there are fresh assets pouring in every month and when employees leave jobs or retire, they produce rollovers that build up IRA accounts for financial advisors. The drawbacks of getting into the 401(k) business are still in place, too. Dealing with retirement assets is really a second line of business and it remains -- unless you overcharge with hidden fees -- a low margin business with high potential fiduciary liabilities.

Still, the outsourcers, infrastructure and accumulated knowledge for RIAs to capitalize on is growing daily and a the mega-shift of assets away from brokers is making the 401(k) business riskier and riskier -- to ignore.


Michael Kreps: The DOL is allowing states to set up automatic enrollment for IRAs without triggering ERISA rules. This is setting up an unfair advantages.

401(k) industry howls as DOL lets state governments become DC providers with advantageous exemptions

Multiple employer plans' under states will have economies of scale, fewer rules, while ERISA bars private firms from banding together

December 10, 2015 — 7:00 PM UTC by Lisa Shidler

Brooke’s Note: The sources in this story are of two minds about state governments being allowed to compete with private providers in the 401(k) business. So am I. The good news is that states will bring more competition to a defined contribution industry that badly needs it. But if that competition exists on a less-than-level playing field, it starts to feel like a government subsidy, with the attendant unintended consequences, that tend to ...

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Matt Bayley: They needed to have kept proper records and explained themselves in those records.

Will the alternative assets Intel added to its 401(k) plan backfire legally as well as financially?

New lawsuit alleges that spicing the DC plans with $2.5 billion of bets on de facto dark pools of 'shudder'-worthy alternatives cost participants hundreds of millions of dollars

November 12, 2015 — 8:55 PM UTC by Lisa Shidler

Brooke’s Note: Active investing on the wane these days, a casualty of too many bad bets levied under cloak of darkness. By contrast, passive investing, delivered mostly in the form of ETFs, runs free across sunlit fields of closely mown grass. But hedge funds refuse to quit the field. Not to believe in them, after all, would be to give up our deepest-seated beliefs in financial wizardry. Now, unsentimental lawyers seem bent on making ...

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Sallie Krawcheck: If not me and my team, then who?

'Bristling' at 'pink-it-and-shrink-it' pitfalls, Sallie Krawcheck files an ADV

Ex-Merrill Lynch chief's Ellevest will charge double the Betterment rate but with hopes of better investing for women

November 9, 2015 — 11:58 PM UTC by Lisa Shidler

Brooke’s Note: One of the best indicators of whether an entrepreneur will succeed is how much pride is on the line. Once the world is watching, that poor exposed soul has little choice but to succeed or to go down swinging. Business is tough, but a talented person giving it their all, with no plan B, will generally succeed. Sallie Krawcheck has willfully painted herself into that corner — possibly making her dangerous to doubters ...

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Bill Sharpe founded Financial Engines so 401(k) participants, with the 1996 ERISA bar set at zippo, got baseline algorithmic attention -- a level of service whose deficiencies were exposed this summer.

How Mutual Fund Store is the real engine now at Financial Engines

Unable to hold 9 million hands as market tanked, Larry Raffone jumped when Warburg Pincus put The Mutual Fund Store on the block

November 6, 2015 — 10:17 PM UTC by Brooke Southall

Brooke’s Note: Though we didn’t see this one coming we can see where it’s headed — much more after a candid interview with Financial Engines CEO Larry Raffone. See: Hitting a robo wall, Financial Engines buys The Mutual Fund Store for $560 million to bust out of 401(k) confines. Here are things to know: Financial Engines has 120 people in Boston, including its CEO. Raffone is pretty much a Fidelity lifer — right ...

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Adam Bold: Putting money into a 401(k) isn't enough.

Hitting a robo wall, Financial Engines buys The Mutual Fund Store for $560 million to bust out of 401(k) confines

The Sunnyvale, Calif.-based robo colossus needed human advisors, and the radio RIA liked having a non-radio source of new clients

November 5, 2015 — 11:15 PM UTC by Brooke Southall

Brooke’s Note: No, we didn’t see this one coming. But as aggressively as human RIAs are trying to add a robo aspect to their businesses, the robos are just as hungry to add people who can explain goals-based investing and staying the course to clients. Both buyer and seller here see greener pastures. Still, this deal between an RIA with location in strip malls wedged between Subway stores and beauty salons and an ...

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Rick Meigs: We need Schwab in the marketplace and this is a very positive move for Schwab.

RIAs stay the course in holding Schwab to its promise of an RIA-in-charge 401(k) plan with a promising result

Only when RIAs proved they'd only take 'yes' for an answer on open architecture and themselves installed as fiduciaries did their San Francisco-based custodian yield with just a minor Morningstar contingency

November 3, 2015 — 8:07 PM UTC by Lisa Shidler

Brooke’s Note: Kudos to Schwab for getting to a good place — our spies say — with its 401(k)-for-RIA plan. But bigger congrats to the RIAs who used their time, energy and influence to stand their ground against Schwab as it moved the goalposts continuously in this process. Surely Schwab must realize that what is good for its 7,000 RIAs will eventually be good for its corporate interests. What RIAs want should constitute ...

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David Blanchett: You may need significantly less of an annuity.

Morningstar report suggests jiu-jitsu tactic for buying annuities: Game them right back by waiting

Seniors who pick their moment can save as much as 50% with patience as the key strategy

October 29, 2015 — 6:29 PM UTC by Lisa Shidler

Brooke’s Note: Buying an annuity has always reminded me of a ninth-grade algebra test involving two trains and when they will meet given limited information on rates of speed and distances apart. It’s hard to get your mind around. But it’s the known known about annuities that makes me nervous: the house always wins. Morningstar researcher David Blanchett shows me how I might be able to use common sense against such a ...

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Fidelity seemed to divert from bottom-up growth ethic in putting Pyramis in a secluded, palatial habitat that looks more like PIMCO's.

Abigail Johnson takes Pyramis back to its Fidelity roots after her father tried to create exalted brand

Unknown and unloved, the 'just-a-no-load' unit that failed to capture 401(k) rollovers is reimagined to appeal more 'sophisticated' clients

October 26, 2015 — 5:26 PM UTC by Lisa Shidler

Brooke’s Note: Even after living with this story for a few days as Lisa wrote it and I edited, I did not come away with a sure sense of why Pyramis failed to succeed as a premium Fidelity brand. Jim Lowell comments that many prospective clients still don’t know the brand 10 years after it was dreamed up. I think that’s an observation to build a theory of brand demise upon. Fidelity ...

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Eduardo Repetto: It's solving a problem before it exists on the back end.

Dimensional Fund Advisors to launch 13 target date funds but can its RIA 'cult' deliver success?

The Austin, Texas-based fund giant sees a 401(k) opening the size of its home state if Vanguard, T.Rowe and Fido are any indication

October 16, 2015 — 4:33 PM UTC by Brooke Southall

Brooke’s Note: The one thing that competitors of DFA and Vanguard could always take heart from was that the cerebral, academic, gentlemanly way that they conducted business showed up not only in the way they invested — it also carried over to how aggressive they were in running their businesses. They succeeded by anyone’s standards but it still seemed like they were somewhat benign competitive forces. There are myriad specifics to the way these ...

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Ken Fisher finally found the 401(k) business to his liking after Ascensus sliced costs and proprietary funds enabled fat profits.

Capitalizing on 'unintended consequences' of DOL changes, Ken Fisher pounces on a fat-margin 401(k) opportunity

DOL greased the skids for closed-architecture approach of $60-billion RIA -- as long as it is discloses use of proprietary funds and sets flat fees that apply to them

October 15, 2015 — 5:28 PM UTC by Lisa Shidler

Brooke’s Note: Most people’s response is to Ken Fisher’s success in creating a $60-billion RIA: Fisher Investments is the exception that proves the rule. His Camas, Wash.-based organization pretty much does it all by telephone with proprietary funds and proprietary everything else. He actually spends money on marketing, in a big, disciplined way. Fisher has long used 'junk mail’ both cyber and in your real mailbox. Now people are discovering “virtual ...

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