ETF-Based 401(k)s Reduce Excessive Fees

Invest N Retire, provider of ETF-based 401(k)s, is on target to finish this year with $500 million to $1 billion in assets. This is in comparison to $50 million at the end of 2006. This is an age where more and more employers are taking steps to reduce 401(k) costs.

Joe Morris of Ignites (sub) reports that this is in sync with rumblings on Capital Hill and in courthouses nationwide. A House hearing is determining if plan participants have enough disclosure as to whether their plans are competitive enough, while employees have also been filing suits against their employers, claiming the plans have excessive fees. A popular option has been to switch from mutual funds to less expensive ETFs. Meanwhile, some employers have been hiring consultants to decipher plan fees for them.

Eleanore Laise for The Wall Street Journal originally reported that the company hired to "salt" your money for you may be wasting it away on things like a telephone help line. "Fees" may be anything from advisory services, help lines, fund management, all making a 401(k) more expensive than a retail brokerage account.

Comments

[Augustus:]

So, what should be the charge for setting up and managing an account for a 25 employee firm with, say, $1.5 million total in the accounts? Darned if I know. But you can't get a whole lot of hand holding, investment advice and 24/7 telephone service for 1% of that, can you?

2007 Mar 21 01:42 AM