“Hiring a Pro to Pick Your Funds: Professional Management Is Latest Option In Some 401(k) Plans, but Fees Can Be Steep“: the Wall Street Journal reports. The article notes how a “growing number of employers are giving workers the option of having a professional mutual-fund picker manage their retirement accounts.” The services offer to tailor a plan for each employee, monitor it and make changes based on market conditions, an employee’s age, risk tolerance and financial goals. The article provides a table comparing the fee structures of the following companies who offer a 401(k) managed account option: Fidelity, Ibbotson, Morningstar, Financial Engines, and ProManage.
Quote of Note: “Federal regulators have also helped clear the way for companies to pick investments for employees. Regulators had long worried about potential conflicts-of-interest. Why wouldn’t Fidelity, say, favor its own offerings? But in a 2001 U.S. Labor Department ruling, the government cleared the way [under ERISA] for an investment firm to give individual advice through an independent, third-party expert.” You can access the DOL Advisory Opinion referred to here.
The Mercury News also reports on the subject: “Firms offer 401(k) hand-holding: Reluctant Investors Get Advice.” The article quotes David Wray, president of the Profit Sharing/401(k) Council of America, as indicating “that 50 percent to 70 percent of newly hired employees are signing up for managed accounts where it’s offered.” Mr. Wray notes that the numbers are “huge” and “very significant.”