News, Vision & Voice for the Advisory Community


RIAs join move to right a 401(k) wrong: Lopsided plan expenses -- a non-DOL issue

Participants using mutual funds with active management pay for their passively managed brethren; with fiduciary issues being taken for real, this is a problem

Author Lisa Shidler September 20, 2012 at 5:01 AM
no description available
Joe Masterson: It's always bugged me that passive investors weren't paying their fair share.

Related Moves

Biz Briefs: The sorry scene at my local First Republic branch • Schwab launches new (smaller) lay-off round • Schwab hoovers pennies passing FINRA fee to clients • Gensler pleas for funds • Fidelity owner's private equity pres. retires • an Orion-Envestnet staff switcheroo • LPL dumps FutureAdvisor

Range Rovers screeched in and drivers joined a grim queue to get their cash, and cookie • The Schwab-TDA deal cull count now stands at roughly 3.5% of its staff • FMR's hockey star president has stepped down • SEC chief wants more enforcers • An Envestnet executive proves joining a rival is good business • LPL now has an in-house robot.

April 29, 2023 at 1:36 AM

Fidelity will hire 4,000 staff in first half -- a staggering number but a tapering off from 'unprecedented' rate in 2021-2022 that catapulted it to 68,000 employees

The $10.3 trillion giant explains its hiring -- in a layoff environment -- as an RIA-like goal, namely having the human bandwidth to develop 'lifetime' relationships with its 40 million investors

February 17, 2023 at 2:49 AM

RIA Quick Takes: Orion deepens DFA embrace by using it as portfolio manager-inside-ETF ~ Hardship withdrawals surge at Vanguard and Fidelity ~ Schwab hires 400 ~ Fidelity flips six funds into ETFs ~ Kitces makes list before Christmas ~ Amit Dogra has $1 billion of good news from his new Portland gig

Americans are struggling, though jobs are plentiful; Larry Fink's ESG zeal costs BlackRock another client, just as the Vatican issues ESG guidance; UBS says we didn't like you anyway to mass affluent and Michael Kitces and Craig Iskowitz join forces.

December 3, 2022 at 3:16 AM

Fidelity Investments loses Kathleen Murphy who largely caught up Fido to Schwab (near $4T) on the retail side by reversing net promoter scores

The 'no whining allowed' leader of the Boston giant's retail business, who oversaw $2 trillion in net new assets, was ready to exit but hung in through a year dominated by COVID-19 challenges

January 23, 2021 at 2:02 AM

See more related moves

Mentioned in this article:

LPL Financial
RIA-Friendly Broker-Dealer, RIA Welcoming Breakaways, Advisory Firm
Top Executive: Dan Arnold

Sheridan Road Financial
Consulting Firm
Top Executive: Jim O'Shaughnessy

Securian Financial Group
401k Plan Consultant
Top Executive: Robert Senkler

Elmer Rich III

Elmer Rich III

September 20, 2012 — 4:12 PM

So if there are more expenses incurred with making decisions to move funds more — who should bear that cost? Not the decision maker?

Should the employees who move their money less and generate fewer expenses for the plan subsidize those who move their money more? Is that the writer’s argument?

In addition, there is good research showing that the more money is moved the more money is lost.

Plan Participant

Plan Participant

September 24, 2012 — 8:28 PM

Does it work both ways? If a participant does not feel they are benefitting from the actively managed products the advisor recommends and opts for the passive options, are they excluded from paying a share of the advisor’s expense? Interesting that advisors are recommending or demanding this approach.

Reality Check

Reality Check

September 25, 2012 — 9:57 PM

Absolutely idiotic. What happens to participation when I charge a $500 per capita to a $750 account balance? How many people with low balances are going to stick around for this nonsense? Wait until the ADP/ACP testing kicks in. Can you find someone sane or knowledgeable for this column?

Lisa Shidler

Lisa Shidler

September 26, 2012 — 5:08 PM

Hey guys, You are right. The whole point of this story is that advisors are trying to make the plan costs fair for participants and make sure that employers understand how everyone is being charged. I personally know many business owners who don’t understand what they’re paying for their 401(k) plan. In addition, I believe the RIAs that I spoke with all said that they feel these issues need to be addressed case-by-case. Reality Check is right – Of course it’s not fair to charge $500 per capita for a $750 account balance. And, let’s face it, in a larger company you will have many small balances and large balances. But for advisors who work with very small companies – say with less than 10 employees they may decide to use a different structure.

What is clearly happening and what we’re addressing is that advisors and employers are trying to look into different ways to make the costs as fair as possible for all employees.

Elmer Rich III

Elmer Rich III

September 26, 2012 — 9:12 PM

Here are some questions:

- How do we define “fair?” Then how do we operationalize?

- Are there really that many plan sponsors who don’t know what they’re paying? Would like to see data.

- Is cheaper better?

Neal A. Thomasl

Neal A. Thomasl

September 28, 2012 — 4:39 PM

The department of Labor must not have enough to do. Kind of reminds me of the changes in 403b a couple of years ago. Do not see the need for more and more complexity- except for jobs for attorneys.

Elmer Rich III

Elmer Rich III

September 28, 2012 — 4:58 PM

Well ERISA is the law and pretty clearly states all material benefits must be formally communicated and on file with the plan sponsor.

However, I have been told if all other plan sponsors are paying $10,000 per account, then it falls within prudent “expert” bounds. Fiduciary does not have any absolute or even objetive standards. it is only what is common practices of fiduciary peers that counts.

If they are all wrong — so be it.

RIABiz Directory

The Industry Sourcebook for RIAs

   |    LISTING

RIABiz Directory sponsored by:

Directory Sponsor Logo