When it comes to 401(k)s, a new La Jolla company considers itself the industry watchdog, arming clients with the analytical tools they need to make educated decisions about their retirement plans.
“We’re trying to become the Consumer Reports of the 401(k) market,” said Mike Alfred, co-founder of BrightScope, a data analytics firm claiming to offer the first online 401(k) rating system and disclosure Web site.
“It’s a true innovation,” he said of BrightScope’s quantitative rating system, which takes into account more than 200 unique data inputs per plan. That calculation is then translated into a single numerical score defining the individual 401(k) plan’s quality at the company level.
Filling a gapAlfred said he and his brother, Ryan, first got the idea for starting a 401(k) assessment Web site after realizing there was a glaring lack of information - and transparency - about retirement plans online.
“I could get a ton of reviews on Amazon.com for a set of pens or a car,” he said. “But searching for information about whether a 401(k) was any good, you just couldn’t find that online.”
It can now be done quickly. BrightScope says anyone can rate his or her company’s 401(k) plan for free in 15 seconds by visiting
Alfred said BrightScope has data on 445,000 401(k) plans nationwide. “We run 5,000 (computer) simulations putting that hypothetical individual in all of those plans that we’ve rated,” he said.
Getting the dataThe end result of that exhaustive computer analysis is an accurate projection showing the retirement age for each individual under different 401(k) plans, he noted.
“We can tell you whether a 44-year-old can retire at 60 under one plan, or 65 under another,” he said. “We can also tell them the total plan cost, the quality of their investment in the plan, the generosity of the company match - basically, a score representing the basic plan that they can easily look at to determine whether their plans are doing well or not.”
Until now, Alfred said, a third party, a company human resources manager or chief financial officer typically has been empowered to negotiate critical terms of 401(k) plans, including employees’ fees, which average 2.5 percent to 3 percent. That, he added, cuts the individual’s potential profits close to the bone.
Helpful information“If you’re not earning more than 3.5 percent on your balance, you’re going backward. To have that drag on their portfolio makes it almost impossible for the average person to get to retirement,” Alfred said.
Leon Kassel, a La Jollan who is an investor in BrightScope, characterizes the company as a “breath of fresh air” for the securities and investment community. “Their business objectives are very timely based on current events and trends,” he said, “and their products should be well received by the investment public.
Transparency and timely information is the name of the game today, and BrightScope understands the concept better than anyone I know.”