Products October 8, 2007

WisdomTree Launches 401(k) Platform

WisdomTree Investments, Inc., today launched a new 401(k) plan solution that uses exchange-traded funds (ETFs) as the core investments.
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To offer this new platform, WisdomTree Investments in April created a new subsidiary, WisdomTree Retirement Services Inc., which is led by Director Al Shemtob (See Wisdom Tree Aims to Bring ETFs to 401(k)s).

At a press briefing, CEO Jonathan Steinberg commented “With emphasis being placed on fees and transparency, we believe the timing is perfect.’ Further, he said that WisdomTree is ideally suited for retirement plans because one of the hallmarks of the company’s fundamentally weighted ETF strategies is the focus on capital preservation and reduced volatility.

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The platform will allow access to index-based investing and WisdomTree’s fundamental ETFs as the heart of the investment strategy, with the option to include mutual funds for additional diversification, the company said. The 401(k) platform also eliminates the trading fees and commissions typically associated with retail ETF purchases, Steinberg said.

The open architecture platform also features third-party Employee Retirement Income Security Act (ERISA) fiduciary and investment advisory services and is designed to be used by plan sponsors, advisers, and third-party administrators (TPAs). The all-inclusive 401(k) ETF program can be accessed for as low as 70 basis points, Shemtob said, at the press briefing.

WisdomTree offers two plan options:

  • The “Model Plan” is a wrap-fee ETF 401(k) turnkey solution that offers six professionally built ETF portfolios attuned to investors’ risk tolerance or target-retirement date. The models feature 11 ETFs from WisdomTree as well as two Vanguard ETFs and two Barclays iShares. Additionally, advisers can supplement the ETF models with a menu of no-load, non-12b-1 mutual funds.
  • The “Custom Plan” features all of the investment options available in the Model Plan and allows advisers who can assume more fiduciary responsibility for their clients to create customized portfolios.

CLS Investment Firm LLC (CLS) will offer the asset allocation services for the platform, Professional Capital Service (PCS) will handle participant recordkeeping, and ICTC (Ameritrade) will perform the custody and trading services.

Compliance October 8, 2007

Fee Disclosure Proposal Draws Industry Criticism at House Committee Hearing

Retirement industry groups told the U.S. House Education and Labor Committee last week that a legislative proposal calling for greater disclosure of 401(k) fees would be too overwhelming for everyone involved, including participants.
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The themes presented in the testimony were threaded together by a few unifying points: 401(k) fees need some clarification and regulation, but Miller’s proposal would impart too heavy a burden on plan sponsors and plan providers without a significant enough gain for participants.

The testimony by industry representatives echoed the same cautionary tone heard after Representative George Miller, (D-California), released the proposal in July (See Fee Disclosure Legislation Introduced in House). Miller is the committee’s Chairman.

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Some of the groups presenting testimony asked that Congress work closely with the Department of Labor, which is already following a phased approach to fee disclosure (See DoL Asks For Advice on 401(k) Fee Disclosures).

“The requirements of H.R. 3185 for participant fee disclosure are numerous, burdensome, complex, and likely to increase participant confusion rather than enhance participant knowledge,” said Lew Minsky, an attorney testifying on behalf of the ERISA Industry Committee, the U.S. Chamber of Commerce, the Profit Sharing/401(k) Council of America and other organizations.

The American Benefits Council said in a statementthat although fee disclosure can help participants better understand their options, “participants need clear, simply short disclosures that effectively communicate the key points that they need to know to decide whether to participate and, if so, how to invest.” The group further said that “plan fiduciaries need more detailed information since it is their duty to understand fully the options available and to make prudent choices on behalf of all of their participants.”

According to the committee, Miller’s proposal would:

*require plan administrators to disclose, in clear and simple terms, all fees charged to plan participants each year;
*help workers better understand their investment options by providing more detailed information on investment strategies, risks, and returns when they sign up for their company’s 401(k);
*ensure that all fees and conflicts of interest are disclosed annually to employers who sponsor 401(k) plans; and
*enhance the Department of Labor’s oversight of 401(k) plans.

Thursday’s testimony from Bradford Campbell, Assistant Secretary of Labor and head of the Employee Benefits Security Administration (EBSA), is here.

A statement by Tommy Thomasson on behalf of The American Society of Pension Professionals & Actuaries (ASPPA) is here.

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