Investor Returns Disclosures
The performance graph attempts to illustrate the value of a retirement investor’s contributions over time based on a number of historical factors. The graph assumes an initial investment of $10,000 along with annual retirement plan contributions of $18,000 per year.
“Investor returns”, assumes the returns experienced by the average U.S. mutual fund investor (see “DALBAR’s 21st Annual Quantitative Analysis of Investor Behavior”), supplemented with reduced retirement plan expenses (see “The 401k Averages Book”) and lower investment cost (see “Putting a value on your value: Quantifying Vanguard Advisor’s Alpha”), plus the additional return generated from ONE’s management of common investor behaviors (see “Help in Defined Contribution Plans: 2006 through 2012”).
This graph is not intended to predict portfolio earnings or performance, nor is it a guarantee of future performance. Actual investors may experience different results from the results shown. The performance graph does not represent the results of actual trading using client assets.
Average Mutual Fund Investor
For the 30-year period ending on December 31, 2014, DALBAR reports that the average mutual fund investor, as a composite (of equity and fixed income), earned 2.47% (source: “DALBAR’s 21st Annual Quantitative Analysis of Investor Behavior”). DALBAR represents itself as “the financial community’s leading independent expert for evaluating, auditing and rating business practices, customer performance, product quality and service.”
Reduced Retirement Plan Expense
Using data from the “401k Averages Book, 15th Edition” (updated through Sept. 2014), the average retirement plan cost for a 401(k) plan with 50 participants, holding $2,500,000 in assets, is 1.44%, which is the total bundled cost, including retirement plan administration expense and investment cost. ONE Retirement’s retirement plan solution can reduce the average retirement plan cost from 1.44% to 0.10%, with 0.10% representing the average cost of ONE’s ETF portfolios. After subtracting the net savings related to investment cost, 0.89% remains as eliminated retirement plan expense. In this analysis, ONE Retirement assumes that its management fee is netted against the value rendered through its version of help, as described in the “Help in Defined Contribution Plans” report.
Lower Investment Costs
Vanguard released its research study titled “Putting a value on your value: Quantifying Vanguard Advisor’s Alpha” in March 2014. In their research, Vanguard quantifies the value an advisor can provide relative to an “average” client, and they report that an advisor can add (i.e., save) 0.45% through the implementation of a cost-conscious index strategy. ONE Retirement utilizes index ETFs with its investors, and these funds have an average expense ratio of 0.10%.
Managing Investor Behavior
In May 2014, Financial Engines and Aon Hewitt released their report titled “Help in Defined Contribution Plans: 2006 through 2012”. In their report, they state that retirement plan investors who use ‘Help’ earn higher returns versus those who do not. Aon Hewitt quantifies this additional return at 3.32% (net of fees), and they attribute that increase in part to helping retirement plan investors determine an appropriate level of risk, as well as effective implementation of investment strategy. ONE implements similar help strategies in working with its clients to prepare for retirement.
Estimated Additional Returns
Estimated Additional Returns (4.66%) represents the savings compared to average retirement plan expenses and the additive impact of lower investment costs, and improved investor behavior over and above the investment returns earned by the average mutual fund investor.