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Exclusive Interview: Frontline Producer Explains Controversial 401k Documentary – The Good

April 30
03:04 2013

(This is the first installment in a series of four articles.)

 When Frontline producer Martin Smith and his crew set out to make a documentary on the problems with the 401k industry, they sought to “alert,” even “shock,” if not downright “scare” the general public. It turns out, The Retirement Gambleaccording to Smith, the PBS show was the highest ranking episode of the popular series since last year’s election – and he’s been getting a ton of email since “The Retirement Gamble” appeared last Tuesday night. Unfortunately, not all the reviews have been good, with many in the industry accusing the show of bias and even normally independent sources questioning the veracity of some of Smith’s claims. was lucky enough to catch up to the busy producer and interview both him and Associate Producer/Reporter (and the man responsible for most of the primary research) Ryan Knutson. What follows are comments we received from both the industry and independent organizations, as well as Smith’s responses where relevant.

The Good:

We should start with the fact many applauded Smith’s effort. “For those of us in the industry [it was] nothing new, but [it was] probably a bit of an eye-opener to the general public,” said Roger Wohlner, a prominent industry blogger.

Many thought the show exposed some of the myths 401k investors believe. One of the primary objectives of the show, according to Smith, was to convince employees not only that their 401k was not free, but that it had a substantial cost. Hilary Martin, 401k Plan Advisor at The Family Wealth Consulting Group in Silicon Valley, California, said, “Mutual fund companies and insurance companies have made billions of dollars charging high fees in retirement plans, and many fees are never disclosed to plan sponsors or investors. Truthfully, I’m shocked that they are allowed to get away with taking people’s money without reporting it honestly. Most people I run into think their 401k plan is free!”

“[Frontline did well to show] that 401k cost for plan participants are not free and the fees are most often too high,” said Craig Morningstar, Chief Operating Officer at Dynamic Wealth Advisors in Scottsdale, Arizona. But he felt “the show only covered 1/3 of the typical hidden fees.” Neda Jafarzadeh, a Financial Analyst at NerdWallet Investing, San Francisco agreed, noting, “While the documentary touches on the subject of expense ratios and revenue sharing payments being passed to investors in the form of fees, there are in fact up to 28 hidden fees which investors should be weary of.”

“I often hear ‘I like Vanguard. It’s free,’” said David Rae, Vice-President Client Services at Trilogy Financial Services in Torrance, California. “[It’s] Amazing how many people think a company can do everything they do, and make a profit all while working for free,” he continued. “Vanguard does have an expense, and they even have a bunch of expenses that investors end up paying that aren’t included in the disclosed expense ratio.” (See “Due Diligence has New Vanguard “Low-Cost” Product Opening to Mixed Reviews,”, February 7, 2012.) Given the prominence of John Bogle and the references to Vanguard specifically, asked Smith and Knutson if they were aware that Vanguard had products that charged hidden fees. The two were quick to point out that Bogle did not speak on Vanguard’s behalf (“Bogle’s interview was just about index funds”). They said they were aware of Vanguard’s hidden fees, but that “Vanguard (as well as Fidelity) rejected our interview request.”

Morningstar was quick to add that there is more to retirement success than just fees. He said, “There is so much more working against plan participants and plan sponsors are the fiduciary party responsible. The show only got into the twilight of the dark side of the plan business. Broker/dealers don’t admit to the obvious; their solutions are all too often not in the participants’ best interests.” Smith told he felt it was important to emphasize fees, especially after being startled to find the fees he was paying in his own plan. He (and it should now be obvious many others share this feeling) believes too many people think their 401k is free. He wanted to prove to them it’s not.

Thomas Balcom, founder of 1650 Wealth Management in Lauderdale-by-the-Sea, Florida also liked the show. He said, “I found the PBS show extremely enlightening. I thought the show revealed many aspects of the 401k industry that were indeed factual. I could relate to many of the topics covered in the show.” Among the bigger issues Balcom has had to address deals with how confused investors are by their 401k plans.

Perhaps reflecting the show’s emphasis on the benefits of having a fiduciary, Elliott Orsillo, Co-Founder & Portfolio Manager at Season Investments, LLC in Colorado Springs, Colorado, said, “I thought the report was very well done. The most interesting point was that 85% of the people who call themselves ‘financial advisors’ are not held to a fiduciary standard and are nothing more than salesmen. As an independent registered investment advisor, we obviously feel that the fiduciary standard is superior to the brokerage model. The show also did a good job exposing all the hidden fees in many retirement vehicles, such as a 401k.”

“I think anything that helps get people thinking about retirement, and stop procrastinating is a good thing,” said Rae. “I also believe that there is a big difference between the advice given by people who are working as fiduciaries and those who are just brokers/salespeople. The more clarity on this topic can only help investors wade through all the information thrown at them and help them choose the right financial planner to help them reach their financial goals.”

If the Frontline piece had just maintained a straight and narrow path addressing the matters mentioned above, it certainly would not have made as much news as it did. But in that drive for ratings points, producers often – willingly or unwillingly – must make a pact with the devil. That’s when things can start to get bad.

Next: The Bad

Interested in learning more about this and other important topics confronting 401k fiduciaries? Explore Mr. Carosa’s new book 401(k) Fiduciary Solutions and discover how to solve those hidden traps that often pop up in 401k plans.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


  1. Alison Farrin
    Alison Farrin April 30, 13:29

    How could anyone beyond first grade think their retirement plan is free? Nothing in life is free except the air we breathe and the sunshine. The real reality is that most of the population expects someone else to figure it out for them. The ones that don’t – one in eight of us, are millionaires. It simply takes paying a modicum of attention, and some discipline. While those of us in the business are outraged, within the greater community – it is still the case that no one cared before Frontline and no one cares after it.

  2. Roger @ The Chicago Financial Planner
    Roger @ The Chicago Financial Planner April 30, 20:35

    I thought the show brought out some excellent points as you mention Chris. However I think the show would have been more effective if they had looked at the good side of things (spent some time on well-managed plans with reasonable fees and solid investment choices as well as profiling folks who have used 401(k) plans as part of a successful retirement strategy) as well as the bad. Their obvious bias really detracted from the message and in the end they offered no suggestions to folks as to how they can improve their chances of retirement success.

  3. Stephen Winks
    Stephen Winks May 01, 09:05

    The subtle point that is missed in The Retirement Gamble is not simply cost is not a consideration under a suitability standard, but that the industry’s fight against brokers being accountable and responsible for their recommendations has crippled professional development. We are now seeing consumer direct value propositions that routinely provide a far higher level of counsel than is possible by a broker working within a brokerage format. This is not the brokers fault. It is the industry self-selecting not to acknowledge or support brokers rendering advice because it triggers fiduciary responsibility in the consumers best interest.

    Not only is the consumer not well served by expensive packaged products which can not be client specific as required for fiduciary standing, but packaged products are expensive, afford no transparency, and individual investment holdings are impossible to manage through packaging as required for continuous comprehensive counsel necessary for fiduciary standing.

    The more questions which are raised, the worse the industry looks.

    There is a leadership vacuum in the consumer’s best interest.


  4. Dennis Myhre
    Dennis Myhre June 24, 11:42


    It has been almost five years since the Frontline documentary aired on the abuses in 401(k) plans, and the industry is still muddled in mire trying to agree on issues that a minuscule amount of common sense would provide answers.

    The term “fiduciary” should not be confused with trying to steal for investors while disclosing the crime… if the typical financial advisor (and many of them do) had empathy for their clients, they would also possess ethics which would produce the desired results, pure and simple isn’t it?

    The problem is not with advisors, but rather the service providers who use advisors for their own backdoor money dealings.

    An advisor should realize if a service provider wants to pay them 300% higher commissions than their competitor, there will be consequences to pay under the new conflict of interest rule. If the regulators would start enforcing the existing laws and prosecute the wrong-doers, the crooked plan providers would be in prison and the crooked advisors won’t have a job.

    Denny Myhre, AIC

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