Bloomberg had an excellent article in late July on the inherent conflict of interest built into many robo-advice offerings. Here is a link to the article.
It will be just a matter of time before the bank company retirement plan providers roll out these robo-advisor offerings to their existing small business company 401(k) retirement plan clients.
Big banks are the perfect partners for mutual fund companies. They can lead mutual fund managers directly to the balances in their client’s company 401(k) retirement plans. This is a marketing and asset-gathering partnership made in heaven for both parties.
Revenue sharing for mutual fund companies is an old Wall Street trick. This article brings to the forefront the fact that this old trick may have found a new audience of big bank company 401(k) clients.
The last brokerage firm training boondoggle event that I attended was in 1995. I did not learn one thing at that event that would benefit my existing clients. But I never spent a dime when I was there. It is a sad commentary on the state of company 401(k) plans that these events are still allowed to take place today.
Wall Street firms and their big bank cousins still reward their investment advisors who sell their preferred list of mutual funds to their 401(k) clients. Revenue sharing lives. That is how company 401(k) retirement plan menus are populated.
Be very careful in screening any robo-advice offering that is offered now or will be announced soon by your existing company 401(k) retirement plan provider. Especially if that provider is a large U.S. bank company.
Ric Lager
Lager & Company, Inc.
