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Rating:Rekenthaler: Yale 401k Study Is An Email Routing List Email & Route  Print Print
Tuesday, July 30, 2013

Rekenthaler: Yale 401k Study Is An "Excellent Resource"

News summary by MFWire's editors

Who knew?

401kWire broke the news of Yale professor Ian Ayres' letters to plan sponsors, accusing them of having high fees, on July 15 and interviewed with Brightscope CEO and Co-Founder Mike Alfred, whose 2009 data is being used in the letters. 401kWire also took a look into academic wrongdoing in Ayres' past and a Yale spokesperson's recent statement on his work.

Last week Morningstar's John Rekenthaler weighed in with his own interpretation of the controversy.

Rekenthaler took a look at the Ian Ayres study, "Measuring Fiduciary and Investor Losses in 401(k)," The paper, co-authored with Quinn Curtis, concludes that 401(k) fund fees are overstated by the media. Rekenthaler called the paper "an excellent resource for seeing how 401(k) plans currently stand."

"The conclusion is straightforward: 401(k) fund fees are overstated by the media," he writes.

He notes that the PBS Frontline documentary, The Retirement Gamble, uses 2 percent as "an assumption of fund fees within a 401(k) plan."

"Figures of that level are common in media reports, which is why a mainstream television show that reached millions could use such a statistic without being challenged. These figures are not, however, realistic," Rekenthaler writes.

In comparison written by Ayres and Curtis challenges these media assumptions, according to Rekenthaler.

For example, the database used by the two academics generated an average fee of 71 basis points, with the highest cost lans charging at most 1.73 percent. Rekenthaler admitted the study wasn't perfect because it doesn't include the very small plans starting at $60,000, and it also lacks the giant plans. However, he writes, it comes close to being representative.

To read more, click here

Edited by: Casey Quinlan


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