The missing link of 401(k) fee disclosure

I finally, albeit reluctantly, opened the statement and couldn’t help but feel something was missing. But I’m getting ahead of myself. Let me start at the beginning.

For a long time I never told people what I really did for a living. We asked my profession, I usually answered “aspiring novelist.” It wasn’t because I was ashamed of investment management. It was because of those awful questions that would ensue.

It’s kind of like if you’re at a party, and someone says they’re a magician. Invariably, somebody asks him to do “his favorite trick” and, pretty soon, he’s surrounded by everyone wondering why he isn’t getting paid.

I quickly discovered the same thing. I really hated when they asked me for my best stock tip. Luckily, I knew enough compliance jargon to convince the curious inquisitors I couldn’t speak about work with non-clients. A quick allusion to insider trading or fiduciary obligation was enough to scare most over to the magician in the room.

Nowadays, and maybe this means something, I don’t know, nobody asks about stocks anymore. Now they ask about their 401(k). Here’s what happens: After I tell them I’m an aspiring novelist, they ask the logical question, “Have you written anything?” I tell them. It doesn’t help my case that the name of the book is “401(k) Fiduciary Solutions.” That immediately blows my cover.

And so they ask me to take a quick look at their statement. I’m too old to fight, so I gently smile, take a look, and say some innocuous thing that makes people think I have no idea how to give advice. That’s the strategy.

Spend a long time talking without ever giving an opinion. That usually works. They usually never ask me again. It’s like the magician who pulls out his hat, tells a lot of punny jokes, and keeps telling them, never pulling the rabbit out. Frustrating, right?

Well, speaking of frustrating, I can’t tell you how frustrated I was the other day. I was at a friend’s house and we’re talking about the election, the economy and the plight of the Buffalo Bills. Then – and don’t ask me how to connect the dots – he out-of-the-blue says he’s never had anyone look at his and his wife’s 401(k) selections. He knows I’ve written about the subject and casually wonders if I’d be willing to take a look. I gently smile and, what can I say, they’re my friends.

So, finally, albeit reluctantly, I open the statements. They’re through September 30^th, 2012. It doesn’t matter that one is from a big Fortune 100 firm and the other is from a big 401(k) service provider. They both contain the same usual mix of dozens of mutual funds, a mix of active and passive.

They both had a disturbing large array of target date funds, although one mislabeled them “lifestyle” funds (there’s a difference and, if you don’t know what it is, send me a note and I’ll write an article on it). The 401(k) service provider’s statement included the standard 12b-1 funds. The large firm contained company stock. In total, nothing surprising.

Except for this.