{"id":280,"date":"2018-06-13T07:03:52","date_gmt":"2018-06-13T12:03:52","guid":{"rendered":"http:\/\/rixtrema.com\/blog\/?p=280"},"modified":"2020-01-09T13:04:11","modified_gmt":"2020-01-09T18:04:11","slug":"401k-similarity-based-quantitative-algorithm","status":"publish","type":"post","link":"https:\/\/rixtrema.com\/blog\/401k-similarity-based-quantitative-algorithm\/","title":{"rendered":"A New Way to Provide Massive Aggregate Plan Savings"},"content":{"rendered":"<p><em>Using 401k Similarity Based Quantitative Algorithm to\u00a0Provide Massive Aggregate Plan Savings in Low Fee Alternatives Report<\/em><\/p>\n<p><span style=\"color: #000000;\">The first optimization report that you will face using <span style=\"color: #0000ff;\"><a style=\"color: #0000ff;\" href=\"https:\/\/www.rixtrema.com\/blog\/?s=401k+FiduciaryOptimizer\" target=\"_blank\" rel=\"noopener noreferrer\">401k FiduciaryOptimizer<\/a><\/span> is called <strong>Low Fee Alternatives<\/strong>. The system automatically prompts you to this screen after you choose any 401(k) plan in the Plan Screener or load your own plan in the Load Plan section.<\/span><\/p>\n<p><span style=\"color: #000000;\">This report is designed to provide financial advisors with lower fee alternatives to the funds filed in original 401(k) plans based on the assumption called <strong>Similarity<\/strong>. For calculation of this measure, the following assumptions are taken into account:<\/span><\/p>\n<ul>\n<li><span style=\"color: #000000;\">Historical correlation of returns for over 30,000 funds taken from Bloomberg, Yahoo and Quandl API sources<\/span><\/li>\n<li><span style=\"color: #000000;\">Fund objective based on Bloomberg source<\/span><\/li>\n<li><span style=\"color: #000000;\">Position data for mutual funds and ETFs taken from SEC EDGAR and ETF provider websites correspondingly<\/span><\/li>\n<li><span style=\"color: #000000;\">Multi-factor multi-asset class factor model used to forecast correlation for those funds where holdings are available<\/span><\/li>\n<\/ul>\n<p><span style=\"color: #000000;\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-281\" src=\"http:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/01\/11.png\" alt=\"1\" width=\"809\" height=\"276\" srcset=\"https:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/01\/11.png 994w, https:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/01\/11-300x102.png 300w, https:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/01\/11-768x262.png 768w\" sizes=\"auto, (max-width: 809px) 100vw, 809px\" \/><\/span><\/p>\n<p><span style=\"color: #000000;\">Thus, <strong>Similarity<\/strong> is an average correlation calculated over two methods: returns based correlation and holdings based correlation on the fund holdings basis. The Similarity should be <strong>0.9<\/strong> or higher for a fund to get on the list of alternatives, which means that all provided funds are <strong>almost identical<\/strong> to those of the original plan, although the <strong>new expense ratio<\/strong> is significantly lower for all of them.<\/span><\/p>\n<p><span style=\"color: #000000;\"><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-282 aligncenter\" src=\"http:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/01\/21.png\" alt=\"2\" width=\"591\" height=\"281\" srcset=\"https:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/01\/21.png 995w, https:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/01\/21-300x143.png 300w\" sizes=\"auto, (max-width: 591px) 100vw, 591px\" \/><\/span><\/p>\n<p><span style=\"color: #000000;\">You can find <strong>Aggregate Plan Savings<\/strong> for the plan in the upper right green field based on the assumptions of <strong>10-year horizon<\/strong> (including basis points per year) and <strong>6% return<\/strong> by default. All fields are customizable and affect the aggregate plan savings. <strong>Average Revenue Share<\/strong> field includes additional plan management fee, which is equal to 12b-1 fee by default, but can be changed later in the <strong>Edit Plan<\/strong> section. The <strong>Add\u2019l Advisor Fee<\/strong> field is the difference between user\u2019s advisory fee and advisory fee for the current plan. The <strong>Annual Inflow<\/strong> is advised to be set as high as 10% to get the most precise data.<\/span><\/p>\n<p><span style=\"color: #000000;\"><img loading=\"lazy\" decoding=\"async\" class=\" size-full wp-image-283 aligncenter\" src=\"http:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/01\/31.png\" alt=\"3\" width=\"556\" height=\"322\" srcset=\"https:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/01\/31.png 556w, https:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/01\/31-300x174.png 300w\" sizes=\"auto, (max-width: 556px) 100vw, 556px\" \/><\/span><\/p>\n<p><span style=\"color: #000000;\">The list of provided funds is taken from the whole universe of funds (<strong>Open Architecture<\/strong>) by default. The upper highlighted green alternative is your current selection. Thus, in order to choose any other fund from the list, you need to remove all the funds located above your desired fund to move it all the way to the top.<\/span><\/p>\n<p><span style=\"color: #000000;\"><img loading=\"lazy\" decoding=\"async\" class=\" size-full wp-image-284 aligncenter\" src=\"http:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/01\/4.png\" alt=\"4\" width=\"481\" height=\"481\" srcset=\"https:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/01\/4.png 481w, https:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/01\/4-150x150.png 150w, https:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/01\/4-300x300.png 300w\" sizes=\"auto, (max-width: 481px) 100vw, 481px\" \/><\/span><\/p>\n<p><span style=\"color: #000000;\">You can also add virtually any fund to comparison picture by clicking on the <strong>+ button<\/strong> in the upper right corner of each box of your original fund list column. When you type in the ticker you\u2019ll be able to choose it from the fall down menu and eventually compare it with any original fund in terms of similarity and expense ratio.<\/span><\/p>\n<p><span style=\"color: #000000;\"><img loading=\"lazy\" decoding=\"async\" class=\" size-full wp-image-285 aligncenter\" src=\"http:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/01\/5.png\" alt=\"5\" width=\"585\" height=\"378\" srcset=\"https:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/01\/5.png 585w, https:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/01\/5-300x194.png 300w\" sizes=\"auto, (max-width: 585px) 100vw, 585px\" \/><\/span><\/p>\n<p><span style=\"color: #000000;\"><strong>EDIT PLAN<\/strong><\/span><\/p>\n<p><span style=\"color: #000000;\">The plan optimization settings are highly customizable, and you can configure them in the <strong>Edit Plan<\/strong> section.<\/span><\/p>\n<p><span style=\"color: #000000;\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-286\" src=\"http:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/01\/6.png\" alt=\"6\" width=\"944\" height=\"315\" srcset=\"https:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/01\/6.png 1200w, https:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/01\/6-300x100.png 300w, https:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/01\/6-1024x342.png 1024w\" sizes=\"auto, (max-width: 944px) 100vw, 944px\" \/><\/span><\/p>\n<p><span style=\"color: #000000;\">First, you can completely restructure your current plan by deleting funds or adding new ones into it.<\/span><\/p>\n<p><span style=\"color: #000000;\">Besides, you can simply <strong>change<\/strong> a <strong>share class<\/strong> for any of the funds of the original plan by clicking on three vertical dots next to each one of the provided fund names and selecting another share class from the list.<\/span><\/p>\n<p><span style=\"color: #000000;\"><a style=\"color: #000000;\" href=\"http:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/02\/6_1.png\" data-rel=\"lightbox-image-0\" data-rl_title=\"\" data-rl_caption=\"\" title=\"\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-295\" src=\"http:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/02\/6_1.png\" alt=\"6_1\" width=\"814\" height=\"427\" srcset=\"https:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/02\/6_1.png 1038w, https:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/02\/6_1-300x158.png 300w, https:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/02\/6_1-1024x538.png 1024w\" sizes=\"auto, (max-width: 814px) 100vw, 814px\" \/><\/a><\/span><\/p>\n<p><span style=\"color: #000000;\">In order to change the <strong>revenue share<\/strong> amount you should uncheck the <strong>Equal To 12b-1 box<\/strong> and type in your own values manually for each fund or the average value for the whole plan in the <strong>Low Fee Alternatives<\/strong> report.<\/span><\/p>\n<p><span style=\"color: #000000;\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-287\" src=\"http:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/01\/7.png\" alt=\"7\" width=\"839\" height=\"577\" srcset=\"https:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/01\/7.png 839w, https:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/01\/7-300x206.png 300w\" sizes=\"auto, (max-width: 839px) 100vw, 839px\" \/><\/span><\/p>\n<p><span style=\"color: #000000;\">If you have specific requirements for the list of funds you may use, please check your options in the provider list fall-down menu. You can also compile your own provider list (in Excel format) and send it to us at <a style=\"color: #000000;\" href=\"mailto:support@rixtrema.com\">support@rixtrema.com<\/a> so our data team will upload it to your personal account shortly and make it available for you only.<\/span><\/p>\n<p><span style=\"color: #000000;\"><strong>ETF\u2019s<\/strong> and <strong>Index Funds<\/strong> are included in the optimization fund list, which can be changed.<\/span><\/p>\n<p><span style=\"color: #000000;\"><strong>Minimum Investment<\/strong> is enforced (parameter can be changed) and <strong>Count of Alternative<\/strong> funds (5 by default) can be reduced or enlarged.<\/span><\/p>\n<p><span style=\"color: #000000;\">When looking for cheaper alternatives it\u2019s always a good idea to get better performing funds as well. By checking one (or some) of the boxes in the <strong>Alternatives Must Outperform Original On<\/strong> field, you demand only the best of the best funds for alternatives that not only going to be better in terms of cost efficiency but will also overcome originals on 1, 3, 5, 10 year performance scale as well.<\/span><\/p>\n<p><span style=\"color: #000000;\">If you mistakenly removed any funds that you needed for your optimization report, don\u2019t worry. You can always get them back to the list by clicking on them in the <strong>Exclusions<\/strong> field at the bottom.<\/span><\/p>\n<p><span style=\"color: #000000;\">All changes are automatically applied and your <strong>Aggregate Plan Savings<\/strong> might change a bit after you edit your settings and get to the <strong>Low Fee Alternatives<\/strong> report.<\/span><\/p>\n<p><span style=\"color: #000000;\">Finding the best ways for your plan optimization is our priority. So we are proudly presenting this quantitative similarity based algorithm to our clients for their self-benefit and the benefit of their clients.<\/span><\/p>\n<p><span style=\"color: #0000ff;\"><em><strong>Request a preview of all the features of 401k FiduciaryOptimizer, a Quantitative diagnostics\/improvements for retirement plans to accelerate your plan sponsor AUM growth:<\/strong><\/em><\/span><\/p>\n<p><a href=\"https:\/\/rixtrema.net\/401k\/requestdemo?source=rixtremacom\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-804 size-full\" src=\"https:\/\/www.rixtrema.com\/blog\/wp-content\/uploads\/2018\/04\/Screenshot_5.jpg\" alt=\"\" width=\"330\" height=\"41\" srcset=\"https:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2018\/04\/Screenshot_5.jpg 330w, https:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2018\/04\/Screenshot_5-300x37.jpg 300w\" sizes=\"auto, (max-width: 330px) 100vw, 330px\" \/><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Using 401k Similarity Based Quantitative Algorithm to\u00a0Provide Massive Aggregate Plan Savings in Low Fee Alternatives Report The first optimization report that you will face using 401k FiduciaryOptimizer is called Low Fee Alternatives. The system automatically prompts you to this screen after you choose any 401(k) plan in the Plan Screener or load your own plan&#8230; <\/p>\n<div class=\"clear\"><\/div>\n<p><a href=\"https:\/\/rixtrema.com\/blog\/401k-similarity-based-quantitative-algorithm\/\" class=\"excerpt-read-more newsstand-button\">Read More<\/a><\/p>\n","protected":false},"author":3,"featured_media":1062,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[37,179],"tags":[41,7,12,172],"class_list":["post-280","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-technical-advice","category-using-larkspur-rixtrema-tools","tag-401kfiduciaryoptimizer","tag-financial-advisor","tag-financial-advisors","tag-retirement-plan-advisors"],"jetpack_featured_media_url":"https:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2017\/02\/how-to-offer-big-business-perks-on-a-small-business-budget-640x3021.png","yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v15.9.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>A New Way to Provide Massive Aggregate Plan Savings<\/title>\n<link rel=\"canonical\" href=\"https:\/\/rixtrema.com\/blog\/401k-similarity-based-quantitative-algorithm\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"A New Way to Provide Massive Aggregate Plan Savings\" \/>\n<meta property=\"og:description\" content=\"Using 401k Similarity Based Quantitative Algorithm to\u00a0Provide Massive Aggregate Plan Savings in Low Fee Alternatives Report The first optimization report that you will face using 401k FiduciaryOptimizer is called Low Fee Alternatives. 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