“There is substantial evidence that Wall Street managers
are unable to beat passive equity index funds that cost much
less in fees…If public pension fund assets were indexed to
relevant markets rather than actively managed, the public pension
systems in Maryland and across the United States would save
enormous amounts of money on fees, without undue harm to investment
performance…pension systems would be wise to index the systems’
portfolios to ensure average investment returns. This would be a safer, more
responsible use of system resources than paying Wall Street management
firms millions of dollars each year to deliver sub-par results on public stocks and
bonds and risky private alternative investments.”
July 201223
“The Triumph of Index Funds”“Investors Flock to Vanguard, Turning
Away from Stock Pickers”
“America Can’t Afford Wall Streets’
Terrible Investment Advice”“Why ‘Boring, Dull Passive’ Investing is Working”“Passive Investing is Winning the Debate”“Active Funds Stink Worse Than Ever”
24
SharingRevenue
36
Commissions
12b-1Insurance Charges – Wrap Charges
SubT-ABroker
Dealer
Soft
Money 37
GAMEShare ClassWhich share class
do you use?
38
Growth FundAmerican Funds
of America
1.44% 1.40% 1.09%
.68% .54% .49%
R1 R2 R3
R4 R5 R6
39
Blue ChipT Rowe Price
.74% 1.00% 1.25%
Growth
FundAdvisor
Class
Class
R
Growth fund
40
41
Record Keeper
Advisor
42
Assets% of
43
Stop paying
Direct
Flat Fees - Unbundled
44
Start paying
Record Keeper
OR
$1,500
OR
$5,000 $10,000
Advisor $750 $3,000 $10,000
45
Case Studies
46
Company A12 Participants$2.2 MillionInsurance & Active Funds
47
1.9% of 2.2 million = $41,800Total Cost
Employee Paid
48
New Plan
49
Record Keeper = $2,600
Advisor = $2,300
= $2,640
50
Total Cost = $7,540
EE Paid
= $2,640
EE Paid
= $41,900
51
Old Plan
= $41,900Total cost
New Plan
= $7,400Total cost
52
Average Annual Savings per Employee =
$3,300$9000
Company B
110 Participants
$7 MillionWrap Fees & Active Funds
53
Total Cost = 1.5%
Employee Paid!$105,000
54
Record Keeper = $14,000
Advisor = $10,000
= $8,400
55
Total Cost = $32,400
56
EE Paid
= ALL
EE Paid
= ALL
Old Plan
= $105,000Total cost
New Plan
= $32,400Total cost
57
Average Annual Savings per Employee =
$660$3000
Company C5 Participants$400,000A Shares & Active Funds