With so many opinions and analyses circulating about 401(k) plans, how much room is there for a pair of former registered investment advisers who are younger than the Internal Revenue Code section that spawned these plans?
Mike Alfred, 28, and Ryan Alfred, 27, co-founders of San Diego-based BrightScope Inc., are trying to promote their message that fees are too high, plan information is too opaque — and they have the proprietary data that can offer DC plans a competitive advantage.
“We felt that decision-making by consumers, plan sponsors and advisers would be greatly improved if they had better data,” said Ryan Alfred, president of the 25-employee company. He used the word “adviser” in a broad sense, noting that it applies to registered investment advisers, broker/dealer representatives or plan consultants.
The Alfred brothers' strategy contains two lines of salesmanship. They want to gain the public's attention with a website (www.brightscope.com), which provides a rating system that creates a snapshot of a company's defined contribution plan. Individual plans are compared to BrightScope's DC universe as well as to selected peers.
They also want to make money by selling products and services to the DC industry. At the moment, advisers account for 70% of revenue; providers and asset managers contribute 15%; plan sponsors represent 10%; and other sources account for 5%, Ryan Alfred said.
Although BrightScope's website and the public rating system are loss leaders, the site's information “drives the whole business,” said Mike Alfred, the chief executive officer, who is four years younger than the federal law that led to creation of the 401(k).