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Comment by sguha | Hacker News Reader

How do these financial services justify charging a percentage of the funds managed? Is there more work involved in handling an account with a larger balance?

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Jesus those fees are high. 50 basis points to just warehouse the money. Wealthfront charges half of that for some moderately sophisticated management.

Plus even more on the employer side! Wow.

And people say they are cheaper than other 401k providers? That's nuts.

EDIT: OK, it appears (https://captain401.com/investments) that they will optionally do some automatic rebalancing for you so they're a bit more than just a warehouse but still.

Hi Folks, Full disclosure, my company also provides small businesses with 401(k) plans.

Fees are extremely important in a 401(k) plan. Guideline never charges fees on AUM. Your money is free to grow. Guideline's average expense ratio is .14 and made up of the very same Vanguard funds. How can we do this? Look at the form ADV for your providers, it will dictate how administrators are compensated. You'll notice lots of hands in the cookie jar... We are full stack, owning every piece of the plan up to custody. We don't outsource. We charge $8/pp/m to the employer, nothing to the participant. You can learn more at https://www.guideline.com

This is 100% true. Mainstream 401k fees are out of control. I don't know how much is opportunism and how much is regulatory burden, but parity to wealthfront or anything else retail would be fucking miraculous.

To put up something concrete, my last large employer had a 401k plan where the cheapest fund we had access to (PLFMX) had an expense ratio of 0.72%. That's in addition to account-level management fees, which I think were ~0.8%.

It would be amazing if Congress eliminated 401ks, and brought over the employer contribution feature as well as the increased participant contribution limits to IRAs. The only reason asset managers get away with charging such outrageous fees is because you're a captive audience with your 401k.

Make them portable such that an IRA is and watch the fees fall.

You guys should check out OctaveWealth 401k (https://octavewealth.com/). They are also YC, have a flat fee 401k (no percent based fees!), and build their investments models in-house.

I was curious if YC had any issues with accepting/funding companies that are in the same space as other portfolio companies. I have heard that venture capitalists often don't. Zenefits and Zen Payroll/Gusto was what came to mind.

My startup is in the financial wellness space of the 401(k) industry (we are not advisors and just do participant education) and I'm going to be applying to to the next session so this bit of news is of interest to me. Thanks.

They're competing with other 401k plans that do the same, but charge a much bigger percentage, and mutual/index funds do, in general, charge a percentage of the funds under management. Don't look a gift horse in the mouth.

However, you're right that costs are less-than-proportional to funds under management, so they usually offer to lower the percentage as you invest more, cf. Vanguard admiral-class shares: https://investor.vanguard.com/mutual-funds/admiral-shares

Our company used Ubiquity https://www.myubiquity.com/retirement/plans/expressk/ which doesn't have asset based fees

Vanguard average expense ratio: 0.18%

another option is Betterment for Business https://www.bettermentforbusiness.com/for-plan-sponsors/

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