FixedFee401k has created something it claims is “entirely new for the 401k industry” and is a response to what it says is an industry-wide lack of transparency and high costs found in the small- to mid-sized 401k market.
Rather than increasing fees as a percentage of assets, the Overland Park, Kansas-based company charges fixed fees for advisory services and a flat, per-participant fee for recordkeeping services.
The brainchild of advisor Marc Wilborn, who has a background in actuarial sciences with large companies and 401k plans, the business developed from what he saw as the “opaque” nature of the cost-structure in the smaller-plan 401k market that few clients understood.
“People get caught up in the auto-aspects of the industry, but at the end of the day, it’s about advisors helping participants effectively prepare for retirement,” Wilborn says. “What is really means is that we have to get rid of asset-based fees, as it leads to the wrong focus. The motivating industry factor should be to get costs down and keep them down.”
As plan assets grow, he adds, 401k fees continue to increase, often without providing additional value to participants—something he says that FixedFee401k changes.
“We’ve run across a few other practitioners that are doing this, but nothing major that we know of,” he explained, when asked about similar offerings. “The industry is largely going in a different direction, and they like the upward sloping fee curve.”
It’s one reason, he says, that private equity-backed robo advisors like Betterment have entered the space.
“The way they’re able to suppress fees is to get rid of the advisor component, but technology is largely there to support, not to solve. Our pricing algorithm means our fees are 50 percent less than traditional models—competitive with robos—but we have the advisor services.”
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.
This is not news. This has been around for years. It is simply a marketing exercise.
Alliance Pension has been charging flat record keeping fees for over 20 years! In addition we are NOT in the advisory business to avoid the conflict being on both sides of the equation brings.