TCW Picks Firm to Help Advise Its 401(k) Clients

TCW Group Inc. on Monday said it would team up with Ibbotson Associates to provide investment advice to employees at companies that use TCW as their 401(k) manager.

In October, Los Angeles-based TCW became the first money manager to get permission from the Department of Labor to advise investors on their 401(k) choices. Money managers weren’t allowed to counsel investors on how much and where to invest before for fear that the fund companies would steer clients to funds with the highest fees.

As part of TCW’s deal with the Labor Department, the company was required to name an independent advisor and an independent software company to create a program that would help investors choose a TCW portfolio best suited to their needs and risk tolerance. Chicago-based consultant Ibbotson, TCW decided, was a good choice for both those roles.

Ibbotson “has had years of experience with its analytical software” as well as the ability to help provide investors with advice on how to maximize returns and minimize risk, said Brian Tarbox, senior vice president of TCW’s defined contribution group.

Neither company would say how much TCW is paying Ibbotson to provide the software and consulting. The Labor Department specified that TCW’s fee could account for no more than 5% of the consultant’s or software provider’s income, to ensure provider independence.

TCW, whose $50 billion in assets is primarily from traditional pension funds, hopes that by providing advice, it can leapfrog ahead of competitors who are already in the fast-growing 401(k) business.

Tarbox said TCW’s service should be ready for all customers by October.