Filed Under:Life Insurance, Life Planning Strategies

Breach of trust by 401(k) trustees?

Despite serving as fiduciaries, trustees favor their own funds, new study finds

Mutual fund families, despite serving as retirement plan fiduciaries and hosting “open architecture” plans, nevertheless favor their own fund offerings, according to new research.

In an academic paper published late last month, Veronika Krepely Pool and Irina Stefanescu, both of Indiana University, and Clemens Sialm of the University of Texas at Austin say that poorly performing funds are more likely to appear on 401(k) menus if they are affiliated with the plan trustee.

The researchers find that trustees favor their own funds, and are far more forgiving of poor performance.

“For example, mutual funds ranked in the lowest decile based on past performance … are approximately two and a half times more likely to be deleted from those menus on which they are unaffiliated with the trustee than from those where they are affiliated with the trustee.”

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Nichole Morford

Nichole Morford
Managing Editor

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