I\u2019ve always been a big fan of index funds, probably more so when exchange-traded funds became a thing. From experience, most funds fail to meet the benchmarks. Yet, I grew up in the retirement plan business when it was claimed that 401(k) funds using index funds cost more.<\/p>\n
If you have grown up in this business after 2012, you will think I\u2019m crazy. Yet I lived in a business where plan sponsors weren\u2019t told about revenue sharing or sub-TA fees that actively managed funds would kick off to the third-party administrator (TPA) to pay for administrative expenses that index funds couldn\u2019t afford to pay. Mutual fund expense ratios weren\u2019t part of the discussion and when plan sponsors weren\u2019t told of revenue sharing, the all-in cost wasn\u2019t a thing.<\/p>\n
Luckily, we now live in a fee-transparent environment, and the studies that show that 401(k) participants are paying less and less in mutual fund expenses is because of the transparency that many in the industry were fighting back in 2012.<\/p>\n
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