Should Venture Capital Invest in New 401(k) Start-Ups?
We think venture capital investors are making a mistake betting big on 401(k) providers who charge 401(k) fees to employees’ retirement savings. Both the public and various non-profits like AARP and governmental agencies are taking a close look at 401(k) fees, and we anticipate 401(k) fee regulation in the future. Besides, just as what happened to mutual fund management fees over the past 20 years, there will be tremendous downward pressure on 401(k) asset-based fees of all kinds.
As more Americans save for retirement, the issue of 401(k) fees will become increasingly more newsworthy and prominent in the minds of small business owners shopping 401(k)s plan for their employees.
We at Pension Systems Corporation have made it company policy since our inception 30 years ago NEVER to charge asset-based 401(k) fees of any kind. 100% of the cost of providing one of our 401(k) plans to a small business is borne exclusively by the employer, not the employees. We think venture capital firms that invested in 401(k) provider startups have made a bet that assumes 401(k) fees will be a significant profit generator for them down the road. We think this will prove to be a losing bet.