401k cutting out the middleman

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Jul 1 26 Comments

My company does it's 401k through Human Interest, which charges 0.5% management fee on the portfolio. I think that's ridiculous considering they offer a limited subset of securities you could buy anyways on your own.

Does anyone know if it's possible to short out the middleman and go straight to fund managers and security issuers like Vanguard or Blackrock and do a 401k with them? I called Vanguard and it seems they only allow 401k accounts for self employed people.

Surely there's another way than letting these middlemen fund managers parasitize off your savings?

Edit: No matching from company.

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TOP 26 Comments
  • Robinhood / Product xQwR50
    I think we use Human Interest too and I had no idea about that management fee. Damn that sucks
    Jul 1 7
    • New / Eng
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      I know. I'm referring to the lack of awareness of interest rate charged on portfolios. It's a major income stream for Robinhood, as well as human interest.
      Jul 2
    • New / Other
      DuQvV7y

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      DuQvV7ymore
      Well, Robinhood couldn’t even do online checking/savings feature properly sooo, I don’t have a lot of faith in them handling 401ks.

      I don’t think many employers would either.
      Jul 2
    • New / Eng
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      Huh? That's not robinhood's business. They're not a bank, otherwise they'd be rekt with regulations.

      This isn't about Robinhood handling 401ks, this is just funny to me because of all the companies' employees, Robinhood's should be the most aware of portfolio size based fees since that's how their margin trading works, and gets them $$$
      Jul 2
    • Robinhood / Product xQwR50
      I should care more about my retirement more than I do. I never bothered to look deep into my retirement accounts or how they're being allocated besides how they're getting diversified.
      Jul 2
    • New / Other
      DuQvV7y

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      DuQvV7ymore
      The bigger issue with 401k is not the trading of it. There’s a lot more involved especially the regulatory compliance which is exactly where Robinhood dropped the ball on their failed banking product.

      If you were an employer why would you risk them managing your 401k if they can’t even properly do what a garden variety credit union can do.
      Jul 2
  • This comment was deleted by original commenter.

    • New / Other
      DuQvV7y

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      DuQvV7ymore
      Compliance, IRS & Treasury reporting and management (loans, etc.) is a value add.

      You can quibble about the fee but let’s not get hyperbolic.
      Jul 2
    • New / Other
      DuQvV7y

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      DuQvV7ymore
      From other posts I can guess that like me you’re not so young.

      Which means you know not to under-estimate the overhead that regulatory filing add to the mix. This is frankly a big part of it. Talk to your accounting department and they’re glad to offload the BS (a giant complexity is also loans).

      Some employers absorb this cost. I’ve created 2 plans in my lifetime and both times I didn’t pass on the cost. Though tbh, I cut some expensive options like loans.

      However, with large employee numbers the cost becomes non-trivial and I see some employers trying to cut costs.

      Point is, a big chunk of this is Uncle Sam’s doing. They could simplify the paper work to match IRA (This is basically what they did with SIMPLE IRA which is a better though less known alternative to 401ks)
      Jul 2
  • Symantec GoRams
    SDA - Does your 401k provider offer that?
    Jul 1 7
    • New / Eng
      Psynaptic

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      Just searched this up. Might be the answer. Will have to check with my HR. Weird to me that this isn't an option for everyone. Are you doing this?
      Jul 1
    • Symantec GoRams
      Yes.
      Jul 1
    • New / Eng
      Psynaptic

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      So after your HR says yes, we do support this, how do you go about starting an account? Which fund management company are you with? Did you have to select it on your own?
      Jul 2
    • Symantec GoRams
      Follow instructions frim your 401k provider to create an SDBA account.
      Once acct is setup, you can transfer funds to SDBA and pick your own securities.

      Our PCRA provider is Charles Schwab
      Jul 2
    • New / Eng
      Psynaptic

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      Ok, did you find a fee difference between traditional 401k account and the SDBA with Charles Schwab? It sounds like it's still employer chosen, just with more options in what securities you can buy, so I'm wondering if the fees stayed the same between the two options
      Jul 2
  • Microsoft clBY20
    Interested. We use fidelity. Can’t figure out their charge due to their purposely built shitty website
    Jul 1 4
    • OpenText RIP Theon😥
      I use fidelity too. One of us should call them and find out if their 401k charges a percentage of our portfolio as management fee.
      Jul 1
    • New / Eng
      Psynaptic

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      You should definitely find out. I found out only after a phone call. It was not very clear from the website or documents.
      Jul 1
    • OpenText RIP Theon😥
      The Human Interest site is pretty clear about the fees though:
      Jul 1
    • New / Eng
      Psynaptic

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      *shrugs*, I first found out through a call when the fine print they handed me at my company wasn't very clear. I only saw my account portal after I logged in and didn't see this page.
      Jul 1
  • Amazon +?
    Does your company offer matching? You would not get that going externally.

    The "management" fee, should not be a flat overall fee.
    Each fund selection usually has its own fee, because Index funds and require less work, they usually have lower fees.
    If you have to pay .5% just to hold your money and for the website, it it too much.
    Jul 1 2
    • OpenText RIP Theon😥
      You may have a similar % fee on your 401k but don’t know about it due to it being hidden in the fine print. We should get to the bottom of this and find out.
      Jul 1
    • New / Eng
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      It's just for holding the money. Yes, agree it's too much, but it's also apparently pretty standard, so, would expect a bunch of us to be getting shafted.
      Jul 1

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