[JDowding]

I am wondering if I am paranoid:  the selection of available mutual funds made my available by employer is limited to about 30 funds.     I diligently researched the most promising funds from that list, and selected 3 (low expense, morningstar rated).    Now, 2 months later, my employer is changing up the list, and 2 of my funds are going off.  Unless I select otherwise, they are going to automatically shift me into two other funds. 

As I look at the news funds, I don't see any advantage over the old ones, one has a tad lower expense, but is not rated, and is new, so it has no history.    I asked my employer what they didn't like about the old funds, and why they thought the new ones were better, but that was ignored.

So I am wondering if there is some other incentive to the employer when they choose what funds to make available?   Like, are they getting a kickback?
Is that legal?

Maybe I'm just grumbling, it takes time to try to make informed decisions, having them switched up just two months later is beyond annoying.

[dontvote]

Maybe they changed 401k administrators. That may give you a different mix of funds. If you work for a financial firm that sells mutual funds there may be some conflict requiring a switch.

[thezfunk]

from: JDowding on May 25, 2013, 11:03:42 AM

[Cries]

I just quit my job working in a corporate/investment banking role at the bank with the largest asset management arm in the US.  I can attest that there are "kickbacks" (in your words).  However, on the bank's side, these are structured as cross-sales to justify relationship lending. 

In short, the banks go pitch the CFO/treasurer at corporations and say: "use our high-expense/recently-incubated funds in your 401k, and we'll forever give you cheap loans under any terms you want."

This happens at just about F500 company.

It goes without saying that I immediately pulled all my money out of my company's plan upon resignation. 

[rawraw]

One of my employer 401K's has like 30 options and all the expense ratios are under 1%.  But there is still a difference between the index and actively managed ones, of course.

[TravelingPennies]

from: rawraw on June 19, 2013, 05:24:16 AM

[TravelingPennies]

Good to know -- I wouldn't have connected the two

[TravelingPennies]

Thanks for the comments.   I had also read someplace else (forget where) confirming that this is legal.      In my case, I don't actually think that my own employer is acting in bad faith, the funds that are available did contain funds that I was comfortable with if I spent enough time tracking through them.     I am more unhappy about their unilaterally "transfering" my money from old funds to new funds when the approved list changes.      Of course, I am free to transfer it to another approved fund if I want to, but, ya know, selling is bad.


from: Cries on June 19, 2013, 02:11:25 AM

[TravelingPennies]

Incidentally, I completely agree with you about pulling your 401k money into an IRA that you can manage yourself as soon as you leave the employer.   I wish I had understood that a long time ago.