Which traits define the plans that make the Top 30 Plans list? Here is a quick analysis of the factors that drove top BrightScope Ratings:

1. Generous Company Contributions:

Company contributions are a major component of the BrightScope Rating and thus the Top 30 Plans List. Offering a match or profit sharing contribution to the plan is a great incentive for employees to participate and defer their salary towards retirement.  The #1 Plan, Marathon Oil Company Thrift Plan, matches 100% of the first 7% contributed to the plan for an average Company Contribution of over $23,000 per participant.  This generosity, in turn, helped push the average salary deferral for the plan to over $38,000 per participant.  The average company generosity for a Top 30 Plan in 2012 is over $12,100.

2. Immediate Plan Eligibility:

A plan’s eligibility period is the length of time between when an employee is hired and when they are eligible to participate in the plan. Short plan eligibility requirements allow new hires to save more towards retirement. This year’s Top 30 list includes twenty-four plans with immediate eligibility. Removing barriers to saving is important to the top plans.

3. Immediate Vesting:

While a participant’s elective deferrals are always immediately vested, company contributions can take up to six years to vest depending upon the plan. Twenty-one of the Top 30 plans offer immediate vesting of company contributions thus ensuring that the money in their account is theirs to keep. There are two plans on the Top 30 list that requires six years of employment to become fully vested.

4. Low Fees:

Plan costs can greatly affect investment returns therefore altering participant account balances. BrightScope’s Total Plan Cost (TPC) calculations include investment expense ratios and administrative costs. Among plans found in this year’s Top 30 list, the average Total Plan Cost has dropped by 1.5 basis points to 0.29%. GlaxoSmithKline Retirement Savings Plan has the lowest Total Plan Cost at just 6 basis points, as the company pays for some plan expenses directly from corporate treasury.

5. High Participation Rates:

The first step in saving for retirement is participating in an employer’s retirement plan. Five plans have 100% participation rate this  year, including ExxonMobil Savings Plan, Wellington Retirement and Pension Plan, Amgen Retirement and Savings Plan, Ernst & Young Partnership Retirement Plan, and GlaxoSmithKline Retirement Savings Plan.  We have seen participation rates climb from 93.5% in the 2010 Top 30 List to 95.3% in this year’s list.

6. High Salary Deferrals:

Plans within the 2012 Top 30 list average over $12,700 in salary deferrals per participant, up from $11,600 in 2011. The 2012 list has an average company generosity that is over 300% more generous than other 401(k) plans with $1 billion in assets or higher.

The entire list of the 2012 Top 30 401k Plans with more than $1 billion in assets:

2012 Rank	2011 Rank	Company/Plan	U.S. HQ	BrightScope Rating
1	N/A	Marathon Oil Company Thrift Plan	Houston, TX	91.65
2	2	The Savings Plan of Saudi Arabian Oil Company	Houston, TX	90.87
3	1	Southwest Airlines Pilots Retirement Savings Plan	Dallas, TX	90.82
4	3	Wellington Retirement and Pension Plan	Boston, MA	90.20
5	6	Amgen Retirement and Savings Plan	Thousand Oaks, CA	89.65
6	5	United Airlines Pilot Directed Account Plan	Chicago, IL	89.17
7	7	Employees Savings and Retirement Plan of Credit Suisse Securities (USA), LLC	New York, NY	88.31
8	14	Sanofi-Aventis US Savings Plan	Bridgewater, NJ	87.66
9	9	Southern California Permanente Medical Group Retirement Plan	Pasadena, CA	87.64
10	11	Bristol-Myers Squibb Company Savings and Investment Program	New York, NY	87.01
11	19	Google, Inc. 401k Savings Plan	Mountain View, CA	86.99
12	12	ExxonMobil Savings Plan	Houston, TX	86.88
13	10	Bayer Corporation Savings and Retirement Plan	Pittsburgh, PA	86.82
14	22	IBM Savings Plan	Armonk, NY	86.71
15	20	Genentech, Inc. Tax Reduction Investment Plan	South San Francisco, CA	86.71
16	13	Chevron Employee Savings Investment Plan	San Ramon, CA	86.65
17	15	BASF Corporation Retirement Savings Plan	Florham Park, NJ	86.58
18	N/A	The Roche Savings and Pay Deferral Plan	Nutley, NJ	86.58
19	17	Ernst & Young Partnership Retirement Plan	Secaucus, NJ	86.55
20	18	Anadarko Employee Savings Plan	The Woodlands, TX	86.47
21	N/A	Cisco Systems, Inc. 401k Plan	San Jose, CA	86.35
22	23	BP Employee Savings Plan	Houston, TX	86.26
23	24	Shell Provident Fund	Houston, TX	86.06
24	27	UBS Savings and Investment Plan	New York, NY	85.85
25	N/A	Deferred Profit-Sharing Plan for Salaried Employees	Richmond, VA	85.81
26	21	ConocoPhillips Savings Plan	Bartlesville, OK	85.79
27	29	Goldman Sachs 401k Plan	New York, NY	85.71
28	16	Bechtel Trust & Thrift Plan	San Francisco, CA	85.70
29	26	GlaxoSmithKline Retirement Savings Plan	Philadelphia, PA	85.62
30	4	Deloitte Profit Sharing Plan	New York, NY	85.60

To learn more about the BrightScope 2012 Top 30 401k Plans List please contact us at info@brightscope.com. This award is based on plan experience through 12/31/2011.

*DISCLAIMER: Ratings continually change as data is updated over time. Ratings should be viewed as a “snapshot in time.” To view current ratings information for a given plan click to view the companies plan page. The rating on the plan page may not match the rating at the time of the release of the rankings.

BrightScope  recently made three changes to streamline the process of comparing company retirement plans through our Plan Component Ratings.   We initially created the “Plan Component Ratings” in parallel with the BrightScope Rating with the launch of BrightScope.com in January 2009.  The BrightScope Rating measures the ability of your plan to get the average 401k/403b participant to retirement and is calculated by running thousands of simulations using plan-specific data.  The Plan Component Ratings are calculated separately from the BrightScope Rating and do not sum up in any way – linearly or otherwise – to the BrightScope Rating.  The Plan Component Ratings provide an easy-to-understand analysis of each of the health and performance categories of a 401k plan, independent of its BrightScope Rating.

One major decision with the Plan Component Ratings was how to best measure the “Investment Menu Quality” of a plan in a purely quantitative manner. We ultimately chose relative Sharpe ratio loss as the metric on which we would base this comparative rating.   The ideal menu from a relative Sharpe ratio loss standpoint is one that provides as much diversification opportunity as possible to the participant, while maintaining returns that are similar to those of the benchmark indices.   Although the menu had the potential for outstanding risk/reward characteristics the majority of funds will flow into the default investments choices and none of the participants may have knowledge of the optimal mix of assets.    Given this we did two things.  First we partnered with Target Date Analytics on a grading system for Target Date Funds which are the most common default investments.   Secondly, we shifted from the relative Sharpe ratio loss calculation score to a simple complexity score for the fund lineup… how many funds.

Here is the simplification of the “Investment Menu Quality” Plan Component Rating.

Treasury Inflation-Protected Securities (TIPS) funds have experienced a notable increase in popularity in Defined Contribution (DC) retirement plans, as plan sponsors and participants have sought out safe havens for their retirement savings in an increasingly volatile economic environment. Currently TIPS funds represent roughly $15 billion of investable assets in the $3.2 trillion BrightScope Beacon DC database, but that number has been growing at a steady 30% rate as plan sponsors, consultants and advisors see more value in the diversification and inflation-resistant potential of TIPS funds.

TIPS Funds Continue Strong DC Asset Growth: BrightScope White Paper Series

The Top 20 TIPS Funds:

1. PIMCO Real Return

2. Vanguard Inflation-Protected Securities

3. TIAA-CREF Inflation-Linked Bond

4. BlackRock U.S. TIPS

5. SSgA U.S. Inflation-Protected Bond Index

6. Fidelity Inflation-Protected Bond

7. American Century Inflation-Adjusted Bond

8. Barclays Treasury Inflation Protected Securities Index Trust

9. Northern Trust Daily TIPS

10. Western Asset Inflation Indexed Plus Bond

11. American Beacon Treasury Inflation Protected Securities

12. BlackRock Inflation Protected Bond

13. FFTW Inflation-Indexed Bond

14. Fidelity Trust Treasury Bond Index

15. Transamerica Partners Inflation-Protected Securities

16. Wellington Management TIPS Plus

17. MassMutual Premier Inflation-Protected Bond

18. DFA Inflation-Protected Securities

19. American Century Inflation Protection Bond

20. Fidelity Advisor Inflation-Protected Bond

Please visit our research page here: http://www.brightscope.com/research/

This is a direct link to the TIPS white paper: http://www.brightscope.com/research/paper/481/

If you have any questions do not hesitate to send us a message: research@brightscope.com.

Our new homepage design includes two search bars: one for financial advisor search and one for retirement plan search.  As mentioned in our previous Q&A blog posting, our goal in creating separate search bars is to help you easily and quickly find information.

Additionally, the redesigned homepage prominently features our new Financial Q&A forum, including recently answered questions and our advisor Top Contributors.  By answering questions on the site, publishing financial guides, voting on answers, posting comments, and sharing content on social media, advisors can gain points and become a Top Contributor on the site.  A Top Contributor earns a strategic spot on the homepage, driving increased traffic to their advisor profile.

See below for an example of a Financial Q&A answer feed:

How can advisors get involved?

• Answer questions: View unanswered questions in your areas of expertise and start building relationships with prospects by answering their questions
• Publish financial guides: Publishing financial guides is a great way for advisors to earn points on the site.  Publishing guides on the site allows advisors to be the first face an investor sees when researching a financial issue.  What better way to effectively market than publish content on your areas of expertise?

Currently, only advisor clients and a select beta group of Q&A advisors will answer questions from investors and post financial guides.

See below for a sample financial guide on the site:

How does the point system work?

• Advisor clients have access to a complete guide to your contribution score, but at a high level, advisors will be awarded points for publishing financial guides, answering questions, commenting or voting on other’s contributions, sharing content on social media, and receiving upvotes on their own contributions.
• In our point system, publishing a financial guide is heavily weighted as it requires a significant amount of an advisor’s time.
• New, unique content in both answers and financial guides will be especially helpful for improving their ranking in search results, which will in turn garner more votes and more points!

Why should advisors engage in Financial Q&A?

• Leverage over 250,000 unique visitors a month on our site (and growing)
• Build relationships with clients and prospects
• Showcase your expertise
• A direct link to your advisor profile accompanies each of your answers and financial guides
• Answering questions and posting financial guides often will earn you a spot on our homepage

Questions? Interested in learning more?  Get started with these simple steps.

Email us at answers@brightscope.com.  We look forward to hearing your thoughts!

Which traits define the plans that make the Top 30 Plans list ? Here is a quick analysis of the factors that drove top BrightScope Ratings:

1.    Generous Company Contributions:

Company contributions are a major component of the BrightScope Rating and thus the Top 30 Plans List. Offering a match or profit sharing contribution to the plan is a great incentive for employees to participate and defer their salary towards retirement.  The top plan on the Top 30 list, the Southwest Airlines Pilots’ Retirement Savings Plan , matches 100% of elective deferrals up to 9.3% of the participant’s income. This is a substantial increase when compared to last year’s contribution (100% of 7.8% of income). Company generosity for all plan in the Top 30 list has risen significantly from an average of approximately $8,000 per participant to over $11,000 per participant. Clearly company match is back in a big way.

2.    Immediate Plan Eligibility:

A plan’s eligibility period is the length of time between when an employee is hired and when they are eligible to participate in the plan. Short plan eligibility requirements allow new hires to save more towards retirement. This year’s Top 30 list includes twenty-four plans with immediate eligibility. Removing barriers to saving is clearly important to the top plans.

3.    Immediate Vesting:

While a participant’s elective deferrals are always immediately vested, company contributions can take up to six years to vest depending upon the plan. Twenty-five of the Top 30 plans offer immediate vesting of company contributions thus ensuring that the money in their account is theirs to keep. The Bristol-Myers Squibb Company Savings and Investment Program is the only plan within the Top 30 list that requires five years of employment to become fully vested.

4.    Low Fees:

Plan costs can greatly affect investment returns therefore altering participant account balances. BrightScope’s Total Plan Cost (TPC) calculations include investment expense ratios, administrative costs and also fund-level trading and transaction costs. Among plans found in this year’s Top 30 list, the average Total Plan Cost has dropped by 5 basis points to 0.61%. The ExxonMobil Savings Plan has the lowest Total Plan Cost. This is largely due to the company paying for most plan expenses instead of passing that cost to the participants. Many companies within the Top 30 list pay for plan administration expenses in order to provide a plan with low and competitive fees.

5.    High Participation Rates:

The first step in saving for retirement is participating in an employer’s retirement plan. It comes as no surprise that all plans within the Top 30 list have high participation rates. Seven plans have a participation rate of 99% or greater. The following four plans have participation rates of 100%: Wellington Retirement and Pension Plan, Amgen Retirement and Savings Plan,  ExxonMobil Savings Plan, & the Ernst & Young Partnership Retirement Plan.

6.    High Salary Deferrals:

Plans within the 2011 Top 30 list average over $11,600 of salary deferrals per participant. While the salary deferral average is down slightly when compared to last year’s list, it is more than 320% higher than the average defined contribution plan within BrightScope’s database.

Congratulations to the companies that are represented on the list! The Top 30 401k Plans clearly serve as a model for how to encourage proper saving and investing behavior among employees.

The BrightScope 2011 Top 30 401k Plans List:

2011 Rank	2010 Rank	Company/Plan	U.S. HQ	BrightScope Rating
1	3	Southwest Airlines Pilots Retirement Savings Plan	Dallas, TX	90.83
2	1	The Savings Plan of Saudi Arabian Oil Company	Houston, TX	90.82
3	-	Wellington Retirement and Pension Plan	Boston, MA	90.13
4	-	Deloitte Profit Sharing Plan	New York, NY	89.91
5	5	United Airlines Pilot Directed Account Plan	Chicago, IL	89.11
6	4	Amgen Retirement and Savings Plan	Thousand Oaks, CA	88.99
7	6	Employees Savings and Retirement Plan of Credit Suisse Securities (USA), LLC	New York, NY	88.44
8	16	Novartis Pharmaceuticals Corporation Investment Savings Plan	East Hanover, NJ	88.16
9	2	Southern California Permanente Medical Group Retirement Plan	Pasadena, CA	87.57
10	7	Bayer Corporation Savings and Retirement Plan	Pittsburgh, PA	87.37
11	-	Bristol-Myers Squibb Company Savings and Investment Program	New York, NY	87.23
12	13	ExxonMobil Savings Plan	Houston, TX	87.07
13	18	Chevron Employee Savings Investment Plan	San Ramon, CA	87.03
14	14	Sanofi-Aventis US Savings Plan	Bridgewater, NJ	86.96
15	-	BASF Corporation Retirement Savings Plan	Florham Park, NJ	86.95
16	17	Bechtel Trust & Thrift Plan	San Francisco, CA	86.76
17	-	Ernst & Young Partnership Retirement Plan	Secaucus, NJ	86.65
18	15	Anadarko Employee Savings Plan	The Woodlands, TX	86.64
19	-	Google, Inc. 401k Savings Plan	Mountain View, CA	86.61
20	19	Genentech, Inc. Tax Reduction Investment Plan	South San Francisco, CA	86.36
21	21	ConocoPhillips Savings Plan	Bartlesville, OK	86.30
22	12	IBM Savings Plan	Armonk, NY	86.28
23	8	BP Employee Savings Plan	Houston, TX	86.26
24	24	Shell Provident Fund	Houston, TX	86.23
25	29	AstraZeneca Savings and Security Plan	Wilmington, DE	85.92
26	26	GlaxoSmithKline Retirement Savings Plan	Philadelphia, PA	85.79
27	11	UBS Savings and Investment Plan	New York, NY	85.39
28	23	Federal Express Corporation Pilots Retirement Savings Plan	Memphis, TN	85.26
29	28	Goldman Sachs 401k Plan	New York, NY	85.25
30	-	The Vanguard Retirement & Savings Plan	Malvern, PA	85.20

To learn more about the BrightScope 2011 Top 30 401k Plans List please contact us at info@brightscope.com. This award is based on plan experience through 12/31/2010.

*DISCLAIMER: Ratings continually change as data is updated over time. Ratings should be viewed as a “snapshot in time.” To view current ratings information for a given plan click to view the companies plan page. The rating on the plan page may not match the rating at the time of the release of the rankings.

Many of you are already familiar with our newest product, BrightScope Advisor Pages.  With BrightScope Advisor Pages, one of our principal objectives is to create a community of users on the site by redefining the way investors and advisors engage with each other.  Prior to the December holiday, we will launch a major new Advisor Pages feature, Advisor Pages Q&A.  Q&A essentially allows users to post questions on any financial topic and allows advisors on the site to answer those questions.  Advisors will also have the ability to contribute and publish financial guides to give current and prospective clients more information on their areas of interest.  By answering questions and contributing financial guides, advisors will raise their visibility on the site, on the BrightScope homepage, and in turn, advisors will interact with more prospective clients.  Our aim is for BrightScope Advisor Pages to become the primary place where investors seek and receive financial advice and where advisors provide financial advice and grow their business.

As part of our Q&A launch, we will roll out a significant homepage redesign to reflect the new Q&A feature and highlight the importance of advisor and investor engagement on the site.  Our homepage redesign will also include two separate search bars, one to search for financial advisors and one to search for retirement plans.  As we accumulated a robust data set on financial advisors, we received feedback from users that it was difficult to find advisors and retirement plans within the same search bar.  We hope that two separate search bars will enable users to easily find what they’re looking for.

We are highly confident that our new Advisor Pages Q&A feature will help us increase the number of  investors and advisors communicating on our site.  An important part of our growth will be investor and advisor participation and making sure that everyone knows about us!  Therefore, we will be dynamically marketing Advisor Pages Q&A in the coming months via our blog, Twitter, LinkedIn, Facebook, the press, and other online and offline mediums.

Throughout the various stages of our product development we want to hear want you like, what you don’t like, and how you would do things differently.  Your feedback is incredibly valuable to us and we encourage suggestions from investors and advisors as to how we can improve Q&A as well as other aspects of BrightScope Advisor Pages.  On our part, we plan to be as open, transparent, and accessible as possible in answering your questions and addressing your comments.  We will post our progress, product tweaks, future features, and illustrate our momentum for you to see.

Together, we will revolutionize the investor-advisor relationship, increase the accessibility of financial information, and allow all of us to make better financial decisions.  As you know, our core mission is to help millions retire in dignity, and we are extremely passionate and committed to achieving this goal.  Thank you all for your continued support!  Stay tuned for more updates on Advisor Pages Q&A as well as our upcoming homepage redesign.

*Please send your thoughts and ideas on Q&A to answers@brightscope.com or write a comment in response to this post.

SAN DIEGO, CA–(Marketwire – Oct 18, 2011) – BrightScope (www.brightscope.com), a leading provider of independent financial information and investment research, together with Target Date Analytics (www.ontargetindex.com), the leading independent provider of analysis, theory, and benchmarking of target date funds, today announced the release of Popping the Hood, IV. The newest study in the popular Popping the Hood series provides a detailed analysis of Target Date Funds (TDFs) and fund families, making it the most comprehensive source of information available in the TDF marketplace.

Types of Disclosures

There are a variety of disclosures available about advisors from the SEC and FINRA. Below are examples of some of these disclosures and why they matter to investors:

How Investors can use Disclosure Information.

Investors can use disclosure information as a source of questions they plan to ask an advisor in their due diligence process. One or even multiple disclosures should not immediately disqualify advisors from a potential engagement, but should trigger a question from the investor and a conversation with the advisor about the disclosures. As one example, let’s look at customer complaints. Complaints can happen for a variety of reasons. The complaint could come from an advisor’s direct relationship with a client or their role in supervising other advisors. The complaint may arise from a unique event or it may reveal a general industry trend. For example if you review recent complaints, many of them relate to the performance of Auction Rate Securities (ARS). The failures in that market have led to a flood of disputes against FINRA brokers and member firms. In 2008, in response to this activity, FINRA established a separate, specialized arbitration process to deal with ARS complaints. Understanding a complaint triggered by a broad industry event and how that is different than a complaint from an individual client is important.

In our discussions with investors and advisors about the Advisor Pages we have consistently stated that the details of a given disclosure is as important as its existence. All disclosures are not equal. An advisor that has been in business for 30 years is much more likely to have a disclosure than one who has been in the business for 5. With a full 10% of advisors in our database having disclosable events there is a reasonable probability that when vetting advisors you will come across an advisor with a disclosure. If that advisor has a single disclosure or multiple disclosures related to a single event it is important for the investor to ask the advisor about that event’s unique circumstances and make a determination as to the impact of that event on their circumstances. Investors should be cautious when a pattern of disclosures emerges rather than a single event, although all disclosures should be taken seriously.

Our Personal Experience.

My brother Mike Alfred and I have worked as financial advisors and have been regulated by FINRA and the SEC. We have a customer complaint on our record, so we are very familiar with advisor disclosures. Our personal experience with the complaint process and the resultant disclosures is one of the primary reasons we embarked on a mission to make this data more transparent and accessible to investors.

We became financial advisors at AXA Advisors right out of college. In order to learn the business we both did a lot of joint work with experienced advisors. In one particular case a client of a more experienced advisor filed a complaint against the advisor. The complaint alleged that the client purchased “securities, policies, annuities and other financial instruments which were unsuitable, irresponsible, not reasonably needed and lacking a strategy for risk management.” Mike and I were named in the complaint because we received some of the commissions from the product sales.

We played no ongoing role in the arbitration and when AXA ultimately decided to settle (without admission of wrongdoing), we were not required to pay any of the settlement. However, we did learn a lot through this process about how FINRA arbitration works, about U-4’s and U-5’s, and perhaps most importantly about the suitability standard of care. FINRA-regulated brokers are held to a ‘suitability standard’ that requires that products sold must be suitable to the client. The sales culture of our firm at the time really pushed insurance product sales and that is how advisors were measured and compensated. While we really wanted to be trusted advisors, we realized through the process that we were looked at by our firm and by our clients as salespeople, not advisors.

Mike and I ultimately decided that the sales culture at our firm and the suitability standard did not fit the types of relationships we wanted to have with our clients. It was around this time that we discovered that there was another way to do business, as an RIA. We spoke with a few local RIA’s and realized that operating under the fiduciary standard and not selling any products was the way we wanted to work with our clients. We later left the broker-dealer world and established our own SEC registered firm, Alfred Capital Management. While running Alfred Capital Management we had great relationships with our clients and had no complaints or disclosure events. When we eventually shut the firm down to run BrightScope full time we did so on our own terms and helped our clients successfully transfer their accounts to other local RIA’s that we helped them vet.

We are absolutely committed to bringing transparency to the financial markets. Just like every one of the nearly 450,000 advisors/brokers in the database we have our disclosure history on our BrightScope Advisor Page profiles. You can view Ryan’s page here and Mike’s page here. We think this information is vital for consumers to ensure they can do thorough due diligence before hiring an advisor.

The Simple Advisor Pages Search Interface

Why the Advisor Pages are Important

Over the past few years there have been numerous articles advising consumers on how to find a qualified financial advisor. Despite the volume of articles on the topic, most consumers remain woefully unprepared to research and find a qualified financial advisor. While there are some databases of advisors out there in the marketplace, none are comprehensive, many charge the consumer for access, and none have the kind of detailed disclosure information that is required to perform thorough due diligence. The government databases – primarily from the SEC, FINRA and state insurance and securities regulators – are difficult to access, don’t have robust search capabilities, are full of legalese, and are not indexed by Google. These shortfalls make the government disclosures all but irrelevant.This is a big issue. In a time of financial crisis and after we have come to terms with numerous frauds in the investment world, it is vitally important that consumers have access to the data they need to make smart financial decisions. For many, this means making one major decision – choosing a financial advisor. At BrightScope we believe that the best way to help consumers find the right advisors and to help advisors grow their businesses intelligently is to create a simple, comprehensive, search-friendly database of financial advisors. The launch of BrightScope Advisor Pages^TM is the first step in that process.

The Role of Government in Disclosure

Fortunately we are not the only folks committed to improving advisor disclosure. Just last year Congress passed a comprehensive financial reform bill that included a mandate for the government to disclose more and better information about financial advisors. To start, the Dodd Frank reform bill required the commissioning of a study to decide how to improve financial advisor disclosure. That study is a must read and can be found here. Unfortunately, while the intent was good, the result fell short in many material ways. It is as if the authors were not aware of the great advances in open government data that have taken place over the past few years. The most significant issue is that the study continues to recommend an enhanced role for government in the online publishing of disclosure data. We argue for the private market approach best expressed by Robinson, Yu, Zeller et. al. in their seminal treatise on the changing role of government, Government Data and the Invisible Hand:

In order for public data to benefit from the same innovation and dynamism that characterize private parties’ use of the Internet, the federal government must re-imagine its role as an information provider. Rather than struggling, as it currently does, to design sites that meet each end-user need, it should focus on creating a simple, reliable and publicly accessible infrastructure that “exposes” the underlying data. Private actors, either nonprofit or commercial, are better suited to deliver government information to citizens and can constantly create and reshape the tools individuals use to find and leverage public data.

Many government entities – including HHS, EPA, and the cities of Seattle/San Francisco – have successfully embraced this approach and have as a result greatly expanded the utility of their data. Government entities have completed this at a significantly lower long-term cost than building complicated disclosure websites. Unfortunately, the SEC study on advisor disclosure argued for just the opposite. The study’s authors suggested several minor improvements to the existing disclosure websites, but did nothing to make the data more easily accessible to private actors.

We strongly believe that the best use of government dollars (SEC) and SRO dollars (FINRA) is not a long and complicated study, review, procurement, or rulemaking process that will take years to yield improvements which by the time they are launched will already be outdated. By mandating the right types of disclosures and then making that data publicly available, government/SRO’s can save a whole lot of money and let the market do more to self-regulate.

The Pushback

As former financial advisors ourselves, we knew that we would receive some strong pushback from the firms and advisors in the database. Industry message boards quickly lit up with mostly anonymous comments – both positive and negative – about the quality of the Advisor Pages data and particularly BrightScope’s role as a for-profit business in the disclosure process. We have given it a few days to percolate and now hope to address some of the criticism we have received:

1. Data Quality: The biggest criticism thus far has been about data quality. A journalist we respect – Jessica Toonkel from Investment News – wrote an article titled ‘Advisors Take a Dim View of BrightScope‘ in which several advisors voiced their concern that some of their data is incorrectly displayed on BrightScope Advisor Pages. Here are the highlights:
   1. Overall Data Accuracy: When Jessica reached out to us and shared the concerns of a few advisors we were able to show that in the vast majority of cases the data integrity issues raised were actually cases where the advisor was either unfamiliar with their own public filings or made a mistake in their filing. While we can’t guarantee the accuracy of our data in all cases, no advisor data provided by Investment News revealed inaccuracies in BrightScope data per the government filings BrightScope obtained late last year. If an advisor does find a material discrepancy between our website and the filing we used, we encourage them to reach out to us so that we can quickly address the issue.
   2. Assets Under Management (AUM): In the same article, Investment News  performed a survey asking if the advisor’s assets under management were correct. 84% of advisors responded that their AUM numbers were not accurate. However, in all the cases brought up by Investment News BrightScope shows the exact same AUM number as displayed on the SEC ADV filings as of year-end 2010. Why then are the advisors upset? As it turns out most advisors either don’t agree with the SEC methodology for calculating AUM (the SEC excludes AUA from AUM and thus understates the actual total assets managed by the advisor) or they are dually-registered with FINRA, which currently doesn’t require AUM disclosure. BrightScope also uses firm-level AUM numbers rather than individual advisor AUM, which some advisors argue can lead to inaccuracies. We understand these concerns and are very sensitive to them. We know that while their anger is addressed at us, the issue is really with the current SEC/FINRA disclosure regime from which we obtain our data. To address this issue we are working with the more than 75 advisory firms that are either clients or beta testers to develop a more comprehensive AUM calculation methodology, and will ultimately allow advisors to update their AUM numbers at no cost. This is the type of fast action and responsiveness that the private market can support that can’t be matched by government. Stay tuned for an announcement in the next few weeks when this new system has been launched.
2. Data Timeliness: Because the SEC/FINRA do not make their databases available in machine readable formats, the process of obtaining the data is costly and time consuming. In fact, the SEC/FINRA actively seek to prevent the use of their data by the public. While the SEC claims to not “necessarily oppose the widespread dissemination of registration information” it currently employs expensive private market solutions as counter-measures to prevent access to this public disclosure data. (It is worth noting that the collection, disclosure, and ‘defense’ of the disclosed data is paid for with taxpayer dollars.) In order to overcome these hurdles we frequently have to go through the states, which adds an extra layer of bureaucracy to accessing new filings. That said, we are working on ways to access new advisor and firm filings quickly and hope that we can further reduce the short time lag between filing and updating the Advisor Pages. If the SEC is to comply with the recent Presidential memorandum on regulatory transparency it will likely seek to make advisor data more readily available in the future. For the time being, we encourage all advisors looking to update their Advisor Page to send over their new filing at the same time it is filed with SEC/FINRA so that we can expedite the processing on our end. We will of course do this at no cost.
3. BrightScope’s Business Model: One of the most interesting pieces of feedback we have received relates to our business model. Some advisors have expressed concern that in order to update some parts of their Advisor Pages – AUM, client types, photos, description, designations, links to blogs etc. – they need to be a subscriber. One advisor said he felt like has was being “held hostage” by BrightScope. Again, we are sensitive to these concerns. The first thing an advisor can do if they think data is inaccurate on our site is to compare it to their current ADV filing. We have found that in 90% of cases the inaccurate data is actually data that was inaccurately filed with the SEC/FINRA by the advisor and the inaccuracy is simply being reflected on the BrightScope website. If the advisor wants to fix this data they can simply update their filing and BrightScope will update our database.  We are also working on making certain pieces of data where the advisor feels the SEC rules are too restrictive – assets under management and client types – free to update and change. However, if the advisor wants to pursue full customization and add data that is currently unavailable through the SEC/FINRA we will continue to offer a subscription at $100/month. With the traffic volumes we are seeing and with future enhancements we are planning, we expect Advisor Pages to be one of the most effective marketing tools available to advisors.

The Path Forward

While I spent a good piece of this blog post responding to criticism I would like to point out that internally we see far more positive comments than negative. It is our job to balance both forms of feedback to ensure we are building a product that will meet the needs of consumers and advisors. Just this morning we received the following unsolicited feedback from an advisor:

“(K)eep moving forward on the Advisor Pages project in spite of the protests. There is no way for the average investor to use the internet to find comprehensive data for finding a decent financial advisor or for researching a financial advisor they have already met. The SEC and FINRA sites are needlessly complex and nearly impossible to use for most investors, as well as all parts of the ADV. There will be some growing pains here, but overall the outline we see so far is a huge step in the right direction for investors.”

This type of feedback from advisors encourages us to push forward, while also aggressively pursuing updates and improvements to address the concerns of those advisors who are skeptics. I think many advisors will find that if they reach out to us and start a dialogue that we are very responsive and excited to work with them. We view this initial Advisor Pages launch as the first step in a grander vision of simplifying financial decision-making for consumers. We appreciate your support as we pursue that goal.

We have many enhancements and improvements we will be rolling out in the next few weeks and are excited to share them with you. Please reach out to us via email with questions and feedback: advisorpages@brightscope.com.

Thanks,

The BrightScope Advisor Pages Team

What traits define the plans that make the Top 30 Plans list ? Here is a quick analysis of the factors that drove top BrightScope Ratings:

1. Generous Company Contributions: One of the surest ways to appear on the Top 30 list is to offer a generous match. An employer matching contribution encourages employee participation and increases salary deferrals.  To be competitive on the Top 30 list companies must have a high level of company contributions per participant, which is indicative of generous matching and profit-sharing contributions. The top plan on the Top 30 list, the Saudi Arabian Oil Company, matches 100% up to 9% of employee contributions. The 5th rated  United Airlines Pilot Directed Account Plan, offers a 16% non-elective contribution for all participants. IBM vaulted up the list after changing its match structure from 50% to 6% of pay up to a generous 100% of 5% of pay with an extra 1% thrown in on top. Other companies on the list exhibit similarly generous plan design and as a result show high company contributions. On average companies on the list provided $8,700 in company contributions per active participant. Just as IBM saw its rating increase as its match improved, cutting the match caused a few plans to drop off of the Top 30 list. FreeScale Semiconductor and Motorola  suspended their match and have since fallen out of the top 30.

2. Immediate Plan Eligibility: Plan eligibility is the length of time between when an employee is hired and when they are eligible to participate in the plan. The shorter the time period the better. Twenty-five (25) of the thirty (30) plans on the list offer immediate eligibility to the plan. Last year 23 out of 30 plans offered immediate eligibility. The longest eligibility period was 12 months, for the 22nd rated American Airlines Pilot Retirement plan. This was twice as long as the next longest eligibility period of 6 months for the Federal Express pilots.

3. Immediate Match Eligibility: Five plans on this years list make employees wait an additional period of time to be eligible for employer matching contributions, which is up from just two plans last year. IBM made this change recently, requiring 11 months of service for match eligibility. For the rest of the plans employees are immediately eligible for matching contributions when they become eligible for the plan.

4. Immediate Vesting: All but one of the plans on the top 30 list offer immediate vesting to plan participants. Last year UBS had a 5 year cliff vesting schedule, which was the longest vesting schedule of a plan that made the 2009 list. UBS has since changed to immediate vesting, which played a part in the plan powering to 11th on this year’s list. Exxon is the only plan with a vesting schedule, 3 year cliff, but given the generosity of the plan and the average tenure of the plan’s participants it is unlikely too many Exxon employees are complaining.

5. Low Fees: With all of the goings-on in DC around fee disclosure and with several new regulations out of the Department of Labor over the last 12 months fees will again be an issue of prime importance for plan’s on this list. While many of the plans on this list offer competitively priced funds and services, there is an 0.80% difference between the lowest cost plan on the list and the highest cost plan according to our cost calculations. BrightScope’s Total Plan Cost (TPC) calculations include investment expense ratios, administrative costs and also fund-level trading and transaction costs. To read more about how we calculate these costs and why we include them, please read this blog post. Two of the plans with the lowest all-in fees (including fund-level trading costs) – Chevron and ExxonMobil – benefit from having over 50% of their plan’s in company stock, which is very inexpensive to manage but entails plenty of other fiduciary hazards.  Once again IBM has the lowest total costs, using its almost $32 billion in assets to muscle their fees as low as possible.  All told the average total cost of plans on the list is 0.67%, a full 10 bps higher than last year’s list and definitely something to keep your eye on for next year.  There are 4 plans on the list with total fees above 1% all of which use a healthy dose of retail mutual funds.

6. High Participation Rates: Participation is critical to ensuring retirement outcomes for participants. BrightScope calculates a plan’s BrightScope rating based on the performance of the average participant, so if a lot of employees are not taking part in the plan the plan’s rating can suffer. It should come as no surprise then that there is not a single plan on the list with a participation rate below 90%.  The average participation rate among plans on the Top 30 List is 96%, with ExxonMobil, Amgen, Southern California Permanente and American Airlines Pilots all obtaining 100% participation. This group of 30 also appears willing to adopt automatic enrollment features. In fact, three of the plans on the list -IBM, Pfizer and Amgen – not only offer automatic enrollment, they have a very high default deferral rate.  Both IBM and Amgen have default deferral rates of 5% and Pfizer has a default deferral rate of 6%. BrightScope applauds these sponsors for embracing automatic plan features.

7. High Salary Deferrals: High participation is great, but salary deferrals ultimately drive participant outcomes. The more people save in their 401k plan, the more they receive in company match, and the more their 401k savings compound over time. It is no secret that plan funding is the number one determinant of retirement success. It should come as no surprise then that only 8 plans on the list have salary deferrals below $10,000 per participant, with an average salary deferral of $12,200. The salary deferral average is up over $1,200 from last year. At the top of the list for salary deferrals is Saudi Arabian Oil Company, Southern California Permanente and Federal Express pilots each of which had over $15,000 in salary deferrals per employee . Bayer used rising participation and salary deferrals to jump to 7th on this year’s list.

The BrightScope 2010 Top 30 401k Plans List:

2010 Rank	2009 Rank	Company/Plan	BrightScope Rating	U.S. Headquarters
1	1	The Savings Plan of Saudi Arabian Oil Company	93.17	Houston, TX
2	N/A	Southern California Permanente Medical Group Retirement Plan	89.96	San Diego, CA
3	4	Southwest Airlines Pilots Retirement Savings Plan	89.04	Dallas, TX
4	10	Amgen Retirement and Savings Plan	88.40	Thousand Oaks, CA
5	2	United Airlines Pilot Directed Account Plan	88.30	Chicago, IL
6	9	Employees Savings and Retirement Plan of Credit Suisse Securities (USA), LLC	87.35	New York, NY
7	20	Bayer Corporation Savings and Retirement Plan	87.26	Pittsburgh, PA
8	12	BP Employee Savings Plan	86.99	Houston, TX
9	11	Nucor Corporation Profit Sharing and Retirement Savings Plan	86.97	Charlotte, NC
10	25	Avaya Inc. Savings Plan for Salaried Employees	86.88	Basking Ridge, NJ
11	21	UBS Savings and Investment Plan	86.73	Stamford, CT
12	28	IBM Savings Plan	86.66	Armonk, NY
13	8	ExxonMobil Savings Plan	86.45	Houston, TX
14	N/A	Sanofi-Aventis US Savings Plan	86.42	Bridgewater, NJ
15	N/A	Anadarko Employee Savings Plan	86.35	The Woodlands, TX
16	N/A	Novartis Pharmaceuticals Corporation Investment Savings Plan	86.26	East Hanover, NJ
17	N/A	Bechtel Trust & Thrift Plan	86.17	San Francisco, CA
18	7	Chevron Employee Savings Investment Plan	85.95	San Ramon, CA
19	N/A	Genentech, Inc. Tax Reduction Investment Plan	85.59	South San Francisco, CA
20	N/A	Altria Deferred Profit-Sharing Plan for Salaried Employees	85.35	San Francisco, CA
21	6	ConocoPhillips Savings Plan	85.22	Houston, TX
22	N/A	American Airlines, Inc. Pilot Retirement Benefit Program Variable Income Plan	85.11	Fort Worth, TX
23	27	Federal Express Corporation Pilots Retirement Savings Plan	85.10	Memphis, TN
24	N/A	Shell Provident Fund	84.80	Houston, TX
25	N/A	Sun Microsystems, Inc. Tax Deferred Retirement Savings plan	84.72	Santa Clara, CA
26	23	GlaxoSmithKline Retirement Savings Plan	84.68	Philadelphia, PA
27	N/A	Cisco Systems, Inc. 401k Plan	84.66	San Jose, CA
28	N/A	Goldman Sachs 401k Plan	84.56	New York, NY
29	N/A	AstraZeneca Savings and Security Plan	84.53	Wilmington, DE
30	13	Pfizer Savings Plan	84.52	New York, NY

Overall the list got more competitive than the previous year. To make the list a plan needed a rating above 84.5 whereas last year the 30th rated plan had a rating of 81. Many of the plans that are no longer on this list did not get worse, but simply did not keep pace with the plans that experienced large gains. Here are the plans that are no longer on the top 30 List for 2010: Paccar Inc. Savings Investment Plan, The Cargill Partnership Plan, Textron Savings Plan, Valero Energy Corporation Thrift Plan, Freescale 401k Retirement Savings Plan, the 401k Savings and PSP McGraw Hill, Schering Plough Employees Savings Plan, Motorola Inc 401k Plan, Nortel Networks Long Term Investment Plan, Lockheed Martin Corporation Salaried Savings Plan and the General Dynamics Corporation Savings and Stock Investment plan.

To learn more about the Top 30 Plans List please contact us at info@brightscope.com. This award is based on plan experience through 12/31/2009.

*DISCLAIMER: Ratings continually change as data is updated over time. Ratings should be viewed as a “snapshot in time.” To view current ratings information for a given plan click to view the companies plan page. The rating on the plan page may not match the rating at the time of the release of the rankings.