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Salmon: Beware Schwab's High-Cost Index-Fund 401(k)

Tickers in this article: SCHW

But all of these assumptions are deeply buried and hard to find. As far as Schwab is concerned, the main thing to do is to come up with a large headline figure, something that will make it easier to sell the new index-fund retirement service to the less-sophisticated end of the HR spectrum. Schwab is pretty well positioned in this market: it's known mainly as a discount broker, which means that the brand comes with connotations of low fees and low margins. But if you want to sign your employees up for an index-based 401(k) plan, which is a good idea, then the Schwab plan is not the right way to go, since it's quite possibly the highest-fee index-fund plan out there, once all those advice fees are taken into consideration.

I work for an enormous company with a very financially literate HR department; they're not going to fall for this kind of pitch. But we shouldn't live in a world where every medium-sized company needs to have people who can navigate the hard sell from people like Schwab offering fabulous new 401(k) plans. Right now, it's incredibly difficult and time-consuming to choose between them, and it's easy to see why plan administrators might easily just plump for a known name like Schwab. There really should be some reliable and impartial resource for those administrators. But I'm not holding my breath.

-- Written by Felix Salmon.

Read more of Felix's blogs at Reuters.