More than 72 million Americans save for retirement through 401(k) plans, but most of them don’t know how much they are paying in fees, nor how high fees can diminish the value of their nest egg. Now, thanks to brothers Mike and Ryan Alfred, workers can discover the good, the bad and the ugly about their plans. Three years ago, the tech-savvy duo — both still in their 20s — decided to create a Morningstar-like rating system to shed light on the $3 trillion 401(k) industry. The young investment advisers pursued their idea with the same passion and discipline they bring to training for Ironman triathlons and 100-mile runs in the San Diego canyons. They raised nearly $1 million, then hopped on a plane to Washington to track down critical data at the Department of Labor. The brothers petitioned the department to release more than 100,000 pages of documents so that they could build their database.
In January 2009 they debuted Brightscope.com, which now provides free ratings and fee information on more than 55,000 401(k) plans. The site empowers employees to ask about fees and investment options, and gives plan sponsors leverage to negotiate lower prices with service providers. The Alfreds view complaints from industry insiders about the rating system as proof that they have struck a nerve. The company makes money by selling analytical data to plan sponsors, asset managers and plan providers.
| Retirement tools |
| Fidelity’s Income Strategy Evaluator is a new, free tool at Fidelity.com that enables everyone, not just Fidelity customers, to estimate future retirement expenses and income. The robust tool recommends appropriate investment strategies to generate steady income (with or without using annuities) and provide growth to keep pace with inflation. |
What’s next? Brightscope recently introduced a free search tool to help consumers find, compare and, eventually, rate financial advisers. The brothers, who hope to take their company public in a few years, think their latest innovation will top their first one.
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