401(k) fees aren't everything, says Flanagan

As they examine the 401(k) retirement plan system, policy makers would be wise not to focus all their attention on fees, Martin L. Flanagan, chairman of the Investment Company Institute of Washington said today at the ICI’s general membership meeting.
MAY 09, 2007
As they examine the 401(k) retirement plan system, policy makers would be wise not to focus all their attention on fees, Martin L. Flanagan, chairman of the Investment Company Institute of Washington said today at the ICI’s general membership meeting. Fees are important, said Mr. Flanagan, who is also the chairman and chief executive of AMVESCAP PLC of London, but “too much focus on fees could… drive employers and workers to look at holding down total investment costs when they should be looking at how to provide investment growth by constructing portfolios with the full range of investment options to help build retirement nest eggs,” he said. Mr. Flanagan also warned that as policy makers look at improving disclosure in 401(k) plans, they look at improving disclosure required of all investment vehicles in such plans – not just mutual funds. Mutual funds account for just half the assets in 401(k) plans, he said. The remaining half are invested in other vehicles such as employers’ stock, guaranteed income contracts and separately managed accounts, Mr. Flanagan said.

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