Thank you for raising awareness of the effectiveness of the online investment advice industry in your Oct. 28 story "401(k) investment advice isn't working" by Arleen Jacobius.
While the industry players you quoted in the article appear to be experiencing difficulty selling online advice to plan sponsors and having their participants use the service, our experience at mPower is to the contrary.
Plan sponsors are buying our service. We have added scores of new customers with hundreds of thousands of employee participants, resulting in triple-digit revenue growth over the last 18 months. Our clients' employees use our service. Our long-standing clients who pay for the service as a benefit to employees have an average use rate of more than 50% of that employee base, while our newest clients exceed 15% utilization after the first six months.
From our first client in 1997 through today, we have learned the best strategies to achieve high use of our service, and we share this expertise with our clients to ensure that their employees take advantage of the institutional quality investment advice we provide. That advice, in turn, helps them plan to realize their retirement goals. During the stock market fall in July 2002, our participants looked to mPower to help them through the uncertainty by using our site 200% to 300% more in the days of greatest volatility.
Past independent research on participant satisfaction has confirmed that employees appreciate the value of our service since more than two-thirds of our participant sample is "very satisfied" or "satisfied" with the mPower site. In short, for mPower's customers, 401(k) investment advice is working.
president and chief executive officer
Better advice model
Re: "401(k) investment advice isn't working" (Pensions & Investments, Oct. 28, page 3). In a single sentence from an interview that lasted nearly an hour, this article conveyed the erroneous impression that my company has not pursued its efforts to deliver automated assistance to retirement plan participants.
What your reporter omitted was that, to remedy the problems of traditional advice detailed in this report, Investment Technologies has developed an alternative approach that provides all the benefits of full advice while shielding all involved parties from fiduciary liability. This is done at a cost of $1 per participant per year. Thus, while we clearly agree with the story's basic premise that the traditional advice model has failed badly, we have responded by developing innovative solutions and not by withdrawing from the market, as the article implies.
Furthermore, my reported comment that "participants want face-to-face advice," was part of a larger point that such personalization was simply not economically feasible for the vast majority of participants or providers, and that in order for advice to become available to the mass 401(k) market it would have to be done automatically and electronically. It just needs to be done differently from the way it is currently offered. We believe our approach, which already has been incorporated successfully in MasteryPOINT Financial Technologies' Guidance Plus system, is a major step in this direction.
Brian M. Rom
Send letters to Barry B. Burr, Pensions & Investments, 360 N. Michigan Ave., Chicago, IL 60601, or e-mail to [email protected] crain.com.