Mutual fund expense ratios over the past two decades have made significant progress, according to a new report.
The Investment Company Institute says that the average expense ratio for equity mutual funds held in defined contribution retirement plans fell to just 0.26% in 2023, down from 0.76% in 2000, a 66% decrease that highlights the growing cost-efficiency of plan investing.
The decline has resulted from competitive fund markets, scale economies, regulatory transparency, and advisor-led due diligence, meaning that fees are lower, value is higher, and the fiduciary process is working.
ICI’s report shows that expense ratios for hybrid and bond mutual funds in DC plans have also dropped dramatically. For hybrid funds the decrease is from 0.66% to 0.28% over the 2000-2023 period, while bond funds have seen a decrease from 0.60% to 0.18%.
“The long-term downward trend in mutual fund fees for more than two decades is great news for investors looking to secure their financial future,” said Sarah Holden, Senior Director of Retirement and Investor Research. “These results highlight the care with which plan sponsors curate their investment lineups to include professionally managed, cost-effective, diversified options.”
These savings directly benefit participants, boosting long-term compounding potential, especially in target date funds where expense consciousness is critical due to the default investment status in many plans.
For fiduciary advisors, this trend validates the persistent focus on fund share classes, benchmarking, and prudent menu construction.
Institutional share classes are increasingly accessible even in mid-sized plans, giving advisors another tool to demonstrate value through negotiation and plan design.
As noted in ICI’s Research Perspective, plan sponsors, often with the guidance of advisors, carefully evaluate service providers, default investment options, and fee disclosures to meet their fiduciary obligations under ERISA.
Advisors help ensure that providers' compensation is reasonable, that investment options are prudently selected, and that participants receive clear, comparable cost information.
A reduced expense ratio, even by 10 to 15 basis points, can translate to thousands of dollars in additional retirement wealth per participant over decades, a fact that can be clearly communicated through fiduciary reporting and participant education.
Even small plan sponsors now benefit from features once exclusive to large institutions, the report shows.
Proposition 40 wealth tax could raise $30 billion, not $100 billion, as departures erode the base and voters remain split
Jump is piping FMG marketing content into post-meeting workflows as Zocks opens its platform to more than 32,000 LPL financial advisors
Trevor Uhls pleaded guilty to one count of wire fraud and one count of money laundering.
Osaic and LPL Financial routinely square off in recruiting advisors from other firms as well as from each other.
Meanwhile, Wealthspire's Ground Control business picks up a $1B private wealth firm in London, and Modern Wealth deepens its presence in California.
Knighthead Life entered the market with a competitive MYGA. A strong launch earned advisor confidence and paved the way for FIAs.
As AI makes financial information more accessible than ever, Lana Hock explains why human judgment, trust, and empathy remain the qualities clients value most in a financial advisor
