Morningstar may be upending the 401(k) industry by putting RIAs in charge and making participants pay fees -- but some critics see prohibitive conflicts of interest

None of this rethinks delivery of service offerings to the end client (participant) in the industry effectively. It's great that firms such as Morningstar and Empowar are re-working the plumbing, but for who's benefit? I'd argue the benefit accrues mainly to the advisor community, not the participants, - again. Step back a bit and look what the main points of the article are - 1) technology that allows splitting fees amongst 3 instead of 1 service providers for an all-in cost of 50bps or so. Great. 2) Tacking on managed accounts to plans - and who should pay the fees (to the newly created syndicate). 3) Discussing the compliance/regulatory implications of defaulting clients into managed accounts. Where is a discussion of what the participant actually wants? This is all about what the industry wants - and of course there are likely to be conflicts between what's best for the industry and best for the participant. Financial Engines offers a perfectly reasonable managed account service that I recall garnered only 10-15% of participants at 50bps...and this is from a company that should be able to get in the ear of participants on a relatively regular basis. Why hasn't adoption been higher there? Where is the discussion of transparency that is required by any consumer in making informed decisions? For example, transparency around performance metrics of the individual decision makers. Are managed account advisor services a commodity (as the 15bps pricing of would imply), or is there real risk of an employee getting tied up with a poorly qualified advisor who's come in through Morningstar platform? The industry has always been about "capturing assets" - and this is just adding a few new compensated players to the mix. In this case the captured assets are in retirement plans - whereby the participant has no ability to choose the end advisor, and no ability to research their historical recommendations. Seems to open up plenty of opportunities for the next round of fiduciary lawsuits coming back to the sponsor. Industry remains FUBAR in my opinion.

Interesting, Of course this article presumes that managed accounts add some sort of value. If I had to pick a 'managed account' or a low-cost Target Date fund from now and the next 15 years going forward, my money is on (and in) the Target Date Fund. I'd guess there will be a trend to 'culll a managed account' just like the mutual fund industry has done to bury the poor track records of poor-performing funds. Some folks might benefit from such an arrangement but as per the Financial Engines reference above, it's probably not going to be a main landing spot for employee $'s.