Aided by many low-cost providers and proponents of DB plans or a nationalized DC system, the media continue to focus on fees as the main culprit in the so-called retirement crisis. As a result, plan sponsors and participants are hearing the message that lower cost is better — as evidenced by a recent Fox Business News video. But is there a danger on focusing too much attention on fees, accompanied by an across-the-board proscription about how much plans and their participants should pay?
401(k) plans are not bought, they are sold — advisors who are out beating the bushes have to be paid for their efforts; otherwise there would be far fewer plans than there are now. (Today 401(k) plans are available to 78% of full-time workers.) And smaller companies using insurance platforms sometimes need a greater level of service and hand-holding — often in concert with local pension professionals like TPAs. When selected and monitored prudently, actively managed funds — whether as a stand-alone option or as part of a target-date fund — can dramatically improve outcomes even though they cost more. And advice, especially when provided by an experienced advisor, can really help participants to be smarter and more proactive. So while excessive fees should be reduced, and picking lower share classes when available makes sense, less is not always more.
