Last week word spread that Yale professor Ian Ayres was sending 401(k) plan sponsors letters questioning their plan fees. The news — which was first reported by 401kWire — has caused a stir among retirement advisors and reverberated through the advisor-focused media. Yesterday, it echoed into the Wall Street Journal.

The professors bottom line seems to be that plan sponsors using non-index funds may well be violating their fiduciary duty.

Ayres has gone to ground since the initial report, but in a follow-up today 401kWire delved into his academic past.

Meanwhile, Morningstar's Morningstar's John Rekenthaler has also weighed in on the matter.

Rekenthaler picks up on the extortive tone of the letter, pointing out that 401(k) plan sponsors have dealt with 30 lawsuits over high fees over the past few years, and that Ayres is on law school faculty at Yale. In some versions of the letter, Ayres warned that he would share his research results -- and presumably plan sponsor identities, with the New York Times and other media.

The National Association of Plan Advisors (NAPA) has criticized Ayres' research for using old data from 2009, but Rekenthaler counters that plan features tend not to change much from year to year. This is the third major attack on the industry in the past 14 months, he said, counting FrontLine's The Retirement Gamble and Demos' release of the May 2012 study, "The Retirement Savings Drain: The Hidden and Excessive Costs of 401(k)s.

The criticism of the industry could hurt 401(k) plan sponsors that fundsters work with closely, raising questions about fees in an industry where, like mutual funds, fees are already criticized by the media. The effects of Ayres' letters have already come home to roost for some plan sponsors, The Wall Street Journal writes in a brief recap of an InvestmentNews' report. The InvestmentNews reporter Darla Mercado interviewed David Halseth, owner of Strategies LLC, who had to reassure a client that the information was old and/or inaccurate.

To read our sister publication, 401kWire's, coverage of the letters and its exclusive coverage of Brightscope executives' response to its letter, please click here and here.

To read the complete Rekenthaler report, the WSJ brief and the InvestmentNews story, click here, here, and here. 

Edited by: Casey Quinlan


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