Did they ever leave? Recent court cases and greater 401(k) plan participant awareness have placed distinctly downward pressure on retirement plan fees.
However, in a bit of a clickbaity headline, CNBC (somewhat) examined “Why high 401(k) fees are likely to stick around.”
“Two recent court decisions serve as a good reminder that just because your 401k-plan provider is likely scrutinizing its fees these days, it’s under no obligation to offer you the lowest-cost investments available,” the network cryptically begins.
The victories, involving Putnam Investments and Wells Fargo, will encourage more sponsors and providers to look at the total value provided to participants, above and beyond low fees.
“Plans are now saying they’re looking more at giving access to advice and providing guidance so [workers] can be better allocated in their portfolios and better savers,” CNBC quotes Joe Ready, director of Wells Fargo Institutional Retirement and Trust.
Overall, workers who pay the highest fees tend to be in smaller plans.
“Fees for large retirement plans (1,000 participants and $50 million in assets) has edged down slightly to 0.96 percent from 0.97 percent a year ago, according to data in the most recent edition of the 401k Averages Book. The average cost for a small plan (100 participants and $5 million in assets) declined to 1.25 percent from 1.28 percent over the past year.”
“There are fewer assets to spread the costs around in the smaller plans,” said Joe Valletta, co-editor of the book, told the network.
It closes by quoting Wagner Law Group’s Marcia Wagner, who notes that whichever way fees head, the upshot of the litigation will be investment managers using better standards for adhering to their fiduciary duty, part of which is cost.
“Looking at fees is going to continue and eventually reach into the entire wealth management area,” Wagner concluded.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
