[nordsieck]

They're talking about 401(k), not IRA, which means it has to be managed by a custodian on top of what ever fees a fund charges.

Guideline is trying to be the Vanguard of 401(k) custodians.

The second hand info I have from a startup (that I worked at) negotiating with a 401(k) provider leads me to believe that are basically 2 common 401(k) setups in the industry.

In the least bad case, the company pays a bunch of money to the custodian in exchange for the custodian giving the employees access to good funds (vanguard institutional shares).

In the more bad case, the company pays the custodian nothing, and the employees only get access to funds that kick money back to the custodian. As you might be able to guess, these funds typically have quite high fees.

[saryant]

Isn't Vanguard already the Vanguard of 401k custodians?

(My 401k is managed by Vanguard)

[nordsieck]

Huh - I hadn't realized they were. Most of guideline's copy focuses on low prices, so I assumed that that's an effective way they could differentiate themselves.

I think the important thing to understand about this space is that a custodian is required by law, and that their fees they take are (conceptually) separate from the fees your funds charge.

[busque]

Hi I'm the founder. The copy is not meant to focus on low prices, but rather low expense for the participant. I understand that might be coming through. You are correct on the custodian fee, that is a pass through and having a custodian is great! Appreciate the feedback!

[tanderson92]

Not for solo 401(k) users; that would be Fidelity. Vanguard doesn't allow access to the lower-cost Admiral share classes for solo 401(k)s.

[busque]

Incorrect info here. We are not trying to be the custodian in any way. It's actually quite important that the custodian is separate and that is why we did not bring that service in-house.

[kikowi]

Im European so I don't know much about the retirement plans, but as I see it, the costs are the biggest issue here. Mutual funds rarely outperform index funds, so why not just stick with the passive index funds that have substantially lower costs & can be traded like stocks on the market (anyone can buy them)?

[mcherm]

In the US system, money which goes in certain sorts of retirement plans (like a "401k") is not subject to income tax (at least not in the same way as the rest of your income). But the definition of a "401k" plan requires that you can NOT control the money and make the investments yourself. Instead, you must pay someone else (the "401k plan provider") to control the money for you (typically they offer a small selection of investments and let you pick how to allocate your money among those, then they invest it according to your instructions).

These 401k plan providers charge fees. Typically fairly substantial fees (like 1%) and typically the fees are well-hidden. By "well-hidden" I mean that it probably takes a knowledgeable researcher months to find out what the fees are -- I've certainly never known the fees for any plan I've ever had.

This startup purports to compete by charging fewer fees 401k plan provider fees.

[lewisl9029]

I'm wondering, is there such a thing as a self-directed 401K where you can control exactly your 401K money goes? If so, would employer matching work for these self-directed accounts as well?

[astrange]

There are some, but you wouldn't be able to buy shares in the better classes of mutual funds, like Vanguard InstlPlus. Those rely on the whole company buying the same shares to meet the minimum investment requirements.

[Retric]

My last company had a 50$ per year option that let you buy and sell any stock or few thousand mutual funds. Funds where low cost so it did not seem worth it, but YMMV.

[spacecowboy_lon]

Why is that? in the UK a SIP (Self Invested Pension) can invest in almost anything even direct investments in commercial property are allowed.

Sounds like the USA's Openednded mutual funds are even more dodgy than the uk equivalents (unit trusts)

[idunno246]

i've worked for a company with a plan that offered something like this, however there was an additional fee on top of whatever the costs were. And like the sibling comment says, you get the public etfs, which wont get any bulk savings(oh how i miss my 0.02% ER institutional shares). You are unfortunately still stuck going through the company the employer chose. Very rarely you can get a plan that allows you to roll over while still employed, so if you did that say, annually, you could self direct then.

employer matching was separate, you and the employer add money, then you choose what to do.

IMHO, 401k should go away and the deductible limits on IRA should be raised to compensate and let people do their own thing.

[busque]

Hi I'm the founder of Guideline. I just want to be clear in regards to Guideline pricing. There are no additional fees. We are 100% transparent.

[idunno246]

Oh, does "this" in the first sentence read as guideline? I meant it as, I had a plan with a self directed option, basically direct access to their full brokerage. Didn't think you had any additional fees

[disillusioned]

Yeah, some plans offer self-directed brokerage options, with an administrative fee on top of things. Otherwise, with, say, Employee Fiduciary (one of the dirt cheapest Vanguard-backed administrators out there), we chose 40 funds to offer our employees, though almost everyone has just stuck with the Vanguard Target Date options.

[loeg]

> Guideline is trying to be the Vanguard of 401(k) custodians.

Vanguard is customer-owned, while Guideline is not. That is an important distinction, regardless of current low fees.