SAN FRANCISCO - A new firm is bringing investment advice to defined contribution plan participants online.
The 401(k) Forum Inc. is developing an investment program, offered over the Internet, which gives specific asset allocation advice to plan participants.
The firm will create a customized, interactive World Wide Web page for each plan sponsor client. Participants who sign onto the Web page complete a risk tolerance questionnaire. Within 20 minutes, a computer model scores the participant for his or her risk levels and investment objectives, and comes up with the optimum asset allocation using the investment options offered by the plan. Plan participants also can access an investment education module, Wall Street 101, and an electronically delivered quarterly newsletter.
The firm's chief executive officer, Drake Mosier, previously was a consultant with New York-based Smith Barney, which offers a similar participant advice service - TRAC - in a hard copy form.
Mr. Mosier said the problems many plan sponsors perceive with offering investment advice to plan participants are mitigated by using an independent, third-party adviser. Safe harbors offered under ERISA regarding the prudent man rule also will protect sponsors, Mr. Mosier said, if they have performed initial due diligence on the advice giver, offer prudent investment options and perform regular monitoring of investment options. A disclaimer each participant must read to get onto the Web page explains the advice is offered by the 401(k) Forum according to its co-variance based model.
The 401(k) Forum will offer its product only through plan sponsors, unlike other participant advice services, offered by companies such as the Scarborough Group, Annapolis, Md., and American Express Financial Services, Minneapolis, which sell services directly to plan participants.
The price is fairly inexpensive, Mr. Mosier said, between $9.99 and $19.99 per participant for unlimited online access, depending on the size of the plan and the number of participants, compared with nearly $300 per year for the hard copy reports offered by other participant investment advisers.
Two plan sponsors will beta test the new program by the end of the second quarter. The Web page model does not now offer participants transactional capabilities to change their portfolios and future contribution allocations online. The two companies testing the system do, however, offer employees a direct connection to the record-keeping system where changes can be made via an internal computer network. Plans to help participants with advice on portfolio rebalancing also might be offered in the future.
Retirement planning program out
KANSAS CITY, Mo. - Twentieth Century Services Inc. introduced a retirement planning software program to help defined contribution plan investors develop savings goals and investment strategies to meet them.
The software lets participants look at their retirement plans as part of a total financial picture. Real estate, college and other special investment goals are factored into the model, along with retirement income replacement needs, to most effectively allocate savings and invest appropriately to meet those goals.
The program is available free to Twentieth Century's defined contribution plan clients and to non-clients for $17.95. The program will be made available later to retail investors for a nominal fee.
Customized statements online
SALINAS, Calif. - Sheran & Associates plans to push client service by offering "virtual" retirement plan statements on the Internet. The Silicon Valley record keeper needs to be nimble to keep up with the expectations of a participant base from an area renowned for high technology, said Catherine Peery, a Sheran spokeswoman.
The firm is developing a statement that will be customized to each participant's account available over the Internet.
Another segment of its client base also might benefit from instant computer access to participant records. Sheran & Associates is the record keeper for the defined contribution plans of four major California sports teams: the Los Angeles Raiders, the Oakland Athletics, the San Jose Sharks and the Golden State Warriors. Most players are covered by their own plans, but all management and stadium staff are covered by the plans Sheran & Associates administers. Internet access will allow employees to have instant account information whatever their work schedule.
Each sports team came to Sheran & Associates through a recommendation from local brokers, who know the team management and Sheran well, said Ms. Peery.
Bank offering daily valuation
SAN FRANCISCO - Bank of the West announced it will offer daily valued defined contribution plan services to its defined contribution plan clients, and moved its own $44 million savings plan for U.S. employees into the new program. Bank of the West will expand its services by outsourcing to third-party manager and plan administrator, Federated Investors, Pittsburgh.
In addition to daily valuated record keeping, Federated will provide four lifecycle funds and access to more than 75 funds managed in-house and by external mutual fund families. The LifeTrack education and communication program, developed by Federated, will be used for employee education. Participants can access their accounts via Federated's automated voice-response system. Bank of the West will provide local employee enrollment and investment education meetings.
So far, six clients are being converted to daily valuation from monthly, quarterly or annual valuation systems, said Walton C. Jennette Jr., senior vice president.
U.S.-based employees of the Bank of the West and its parent, Banque Nationale de Paris, will be offered Federated's four Managed Series Trust lifecycle funds and 10 other mutual fund and commingled trust options, all managed by Federated. Four options, all managed by Bank of the West, were previously offered to bank employees. The bank also handled record keeping internally.
Dreyfus targeting small plans
NEW YORK - Dreyfus Retirement Services introduced a bundled service for very small defined contribution plans with 10 to 150 employees.
The Dreyfus Easy 401(k) offers three mutual funds as investment options - the Dreyfus New Leaders Fund, the Disciplined Stock Fund and the General Money Market Fund. Three risk-adjusted lifestyle funds also are offered. Dreyfus also will provide investment education and communications. Mellon Bank Corp., Pittsburgh, Dreyfus' parent company, will provide daily valued record keeping and trust administration services. An automated voice-response system handles participant inquiries, transactions, reallocation of assets, and loan modeling and initiation.
Firm sets new strategies
CHICAGO - Kanne Paris & Hoban plans to launch small-cap value and large-cap yield strategies as part of its strategy to boost its pension client list, including 401(k) plans. The firm has $25 million under management, $5 million of which is institutional.
David P. Goliber, senior vice president and partner, said the small-cap portfolio will be ready in a few weeks; the core, large-cap value strategy will be available by midyear.
The firm is still deciding what type of investment vehicle to use - commingled or mutual funds -and whether to distribute the funds through an alliance.
The firm, which is certified by Illinois as a minority and disabled manager, is discussing joining 401(k) alliances with some groups, said Mr. Goliber, who declined to name any of the parties.