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

May 03
00:10 2013

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

After 53 minutes of watching the PBS Frontline episode “The Retirement Gamble,” many fiduciary advocates were left wanting, but not for the reasons you might think. The industry as a whole had been abuzz in the weeks prior to the airing of producer The Retirement GambleMartin Smith’s documentary. Most of the rumblings, though, focused on the concern Smith would echo the “kill the 401k” mantra or the “only the rich benefit from 401k plans” refrain we’ve been hearing out of Washington these last few months. Rather than these liberal bromides, Smith delivered an incendiary “Wall Street is ripping you off” piece.

Unlike the alleged perpetrators on Wall Street, who commentators say quite frankly did not come off too well on the show, fiduciary advocates had no problem with someone exposing the real problems that exist when a non-fiduciary advises a 401k plan or when a “fiduciary” uses a DOL exemption to engage in self-dealing. Their issue instead deals with one of misplaced emphasis. Smith admitted in his interview with that he wanted to “alert” the general audience that their 401k plan “isn’t free” and he was intent to “shock” them with the horrors of high fees.

We’ve already discussed the questionable “facts” Smith relied on in the previous installment of this series. For this final segment, we want to focus on what many feel was an under-represented reality – the number one problem in the eyes of practitioners and academics alike.

David Rae, Vice-President Client Services at Trilogy Financial Services in Torrance, California, sums it up this way: “At the end of the day, adequately funding your retirement account, and avoiding the temptation to raid your accounts are the most important factors in determining whether you will be able to retire comfortably.” Rae thinks the overemphasis on fees did nothing but “put 401k’s in a seemingly bad light.” He said, “I hope this show doesn’t scare people away from saving for retirement in a 401k plan or otherwise.”

Dan Egan, Director of Behavioral Finance and Investing at Betterment. New York, NY, said, “The worst part of the show is that it was incredibly fear-mongering. The fact is that we have a hard enough time getting people to save and invest for retirement. Without them saving, it’s basically a losing game, and you shouldn’t do it.”

Rae said, “I hope this show doesn’t scare people away from saving for retirement in a 401k plan or otherwise.”

Indeed, immediately after the show, viewers were encouraged to ask questions. One person voiced concern about investing in a 401k. To their credit, the producers pointed out they recommend people stay invested and continue to invest in their 401k plans.

That so many believed “The Retirement Gamble” didn’t feature the importance of savings suggested the show’s producers might have been unfamiliar with a 2012 Wharton Study that concluded savings were more important than asset allocation when it comes to retirement success, (see “New Study Reveals Three 401k Strategies More Important than Asset, August 14, 2012). When asked about this study, Martin said he wasn’t familiar with it, but he did say, “The point about savings is a good one. We feel we brought it up in the beginning of the program.”

Ryan Knutson, the show’s associate producer and researcher, later reread the Wharton study and told, “What we took from it is that there are a number of factors that are important for a secure retirement, including saving more and starting sooner. We did interview Alicia [Munnell, one of the study’s authors] for the documentary, and she made it clear that lowering fees — along with working longer and saving from an earlier age — are all important factors in improving the system.”

Editor’s Note: Alicia Munnell is better known for authoring a more recent paper, (see “Yet Another Independent Study Highlights High Conflict-of-Interest Cost to Retirement Investors,”, February 26, 2013), which, like the Frontline show, fixated on the high fees caused by non-fiduciary/broker conflicts-of-interest before digressing into a non-correlated advocacy of index funds, again, like the Frontline show.]

Despite criticism to the contrary, Knutson believes “The Retirement Gamble” did address the points of the Wharton study. “Indeed,” he said, “Brooks Hamilton says near the beginning of the film that ‘you need 10 or 12 times pay, and maybe 15. So if you make $100,000 a year, you need $1.5 million to be OK. You need to save more. You need to start sooner. You can’t start work when you’re 20 or 22 and decide to get serious about this in your 40s. The boat has sailed.’ A clip from an industry ad near the beginning of the program says if one starts investing $300 a month at 23 he or she can retire a millionaire. There’s no doubt that if one doesn’t save at all, he or she will have no ability to retire. Also, several of those profiled in the documentary (myself included) point out that they’ll have to continue working longer than planned. As we’ve learned, working an extra 5 years is not possible for all Americans. Many get laid off or become ill, thus ending their working careers involuntarily.”

Of course, this (once more) leaves us with the question: “Shouldn’t people be responsible for their own retirement?”

Mike Alfred, Co-Founder and CEO of BrightScope, said, “Simply put, the Frontline producers completely ignored the role and responsibility that individuals have in the process, probably because this angle offers little in the way of entertainment value. The number one problem with retirement savings in America is that American workers don’t save enough. End of story. The fact that this was essentially ignored shows that the producers had little interest in the truth.”

When confronted about the over emphasis on fees, the producers restated their intent to alert investors that their 401k is not free.

Alison Farrin, COO at Innovative Pension Strategy & Design in Poway, California: “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.”

Tim Wochok, Retirement Plan Consultant at Loring Ward in San Jose, California, complains, “The show removes personal responsibility and accountability from individual investors and places full blame on politicians, brokers and mutual fund companies. I agree that politicians, brokers and mutual fund companies have played a large role in the detriments to our system; however, individuals need to play a more active role in securing their retirement savings by spending less, saving more and working with a trusted fiduciary that will help position them for the highest probability of success.”

Which brings us to Martin Smith’s role as a plan sponsor, (as opposed to his role as a producer). In relying on a non-fiduciary to set-up and construct his own company’s 401k plan, Smith committed the very error many small business owners commit. And he can’t totally blame hidden fees for his situation. (Regulators, take note of this.) He claims his own index fund has an expense ratio of 60 basis points, well above the average. Mutual fund expense ratios have been disclosed for a long time. The fact this severe expense ratio aberration did not alarm or “alert” Smith tells us the practical value of disclosure – none – but long-time readers of these pages would already know that (see “Exclusive Interview with Yale’s Daylian Cain: Just a Sugar Pill? Disclosure’s ‘Ah-Ha!’ Moment,”, October 18, 2010). Add this to the omissions of “The Retirement Gamble.”

From his own telling, Smith gives us the impression he failed to fully exercise his fiduciary duty. Is it possible, rather than assume personal accountability for his plan’s failings, Smith has instead chosen to blame Wall Street? The fact he still hasn’t changed his plan provider means he’s likely acting like many of his small company brethren. Given the myriad of choices, and having been burned once, perhaps he’s like a deer in the headlights. Perhaps not. Perhaps it’s something else. As of result of Smith’s public admission regarding his personal 401k difficulty, the Plan Sponsor Council of America (PSCA) offered him free membership. When asked Smith if he’d take the PSCA up on their offer, he said, “No, I don’t think so.” Again, is it the failure to take responsibility that prompts this response, or the bitterness and lack of trust after having been a victim?

Hilary Martin, 401k Plan Advisor at The Family Wealth Consulting Group in Silicon Valley, California, has this advice for Smith and others in his situation: “You can’t retire on being a victim. You have to take responsibility for your own financial success.”

Given the intent of “The Retirement Gamble,” the content of show unfortunately led respected objective observers, especially those who both write on the field and are successful practitioners within it, to conclude it was off the mark. Smith certainly had the weapons at his disposal to remove the perception of bias. He conceded to that he was only a generalist when it came to reporting and could in no way have known what experts know.

While we might be tempted to blame Smith for the failings of his own 401k plan, it’s not fair to blame him for the failings of his Frontline effort. After all, more than 20 years ago in “A Question of Accuracy: How Journalists and Scientists Report Research on Hazards,” (Journal of Communication, Volume 40, Issue 4, pages 102–116, December 1990), Senior Research Scientist Eleanor Singer found “An analysis of news stories that draw on published research shows that, in the process of making science lively and acceptable, most media reports introduce some errors of omission, emphasis, or fact.” Sadly, the consensus among most knowledgeable viewers is that “The Retirement Gamble” hit Singer’s trifecta of errors.

Perhaps Martin Smith, given the fallout after the airing of his report, recognizes this. When asked if he would do anything differently if he ever ran a follow-up to his 401k documentary, he said, “Yeah, the first thing I would do would be to call”

Previous: The Ugly

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Christopher Carosa, CTFA

Christopher Carosa, CTFA

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  1. Phyllis Klein
    Phyllis Klein May 03, 12:44

    Dear Chris: Thanks so much for taking your time to further investigate and shine the light on the half-hearted effort of Mr. Smith’s reporting. As a RIA I watched the broadcast and in simplest terms thought – yes fees have consequences and that at least they put RIA’s in a positive light. I thought many of the same things that your interviewees mentioned and learning about the background and the fact that he actually interviewed experts who did not “support” his position, and subsequently left them out of the story just makes me shake my head and think – this is what is wrong with the news media. I appreciate that you got to the bottom of this piece that could have been so much more in a country that faces a huge retirement savings problem. Keep up the great work!

  2. George Huss
    George Huss May 04, 06:33

    Dear Chris:

    Congratulations for having the presence of mind and the drive to interview Mr. Smith. Well done you. If I am honest with myself, my feelings about the show have moved from apathy to being stunned to indignation. Thanks to your efforts, I can come back to center. No one of us is perfect.

    I will mourn the loss of my devotion to PBS. Had a similar piece been presented in the main stream media, I would not have been at all surprised. Yet, I’ve come to expect a higher standard from PBS. In the process, I believe they have put their standing as America’s most-trusted national institution at risk.

    Thanks for setting the record straight, Chris.

    Warmest Regards,

  3. Ted Leber
    Ted Leber May 05, 15:11

    Fiduciary and PBS miss the mark when they ignore the plight of teachers and the 403bs that are foisted upon them by ignorant School officials. The high fees of most 403bs are criminal, yet no one seems to dig deep into this.

  4. Christopher Carosa, CTFA
    Christopher Carosa, CTFA Author May 05, 15:52

    Ted: Good point. In fact, with recent changes in 403b plan fiduciary responsibilities, plan sponsors of 403b plans are becoming just as liable as plan sponsors of 401k. The trouble with 403b plans is they have been immersed in the broker (i.e., non-fiduciary) world since, again, until recently, they were packaged just like retail retirement products (e.g., IRAs). In fact, to add to your point, both 403b plans and IRAs were ignored by Frontline (although I’ll wager a guess that some of the retirees interviewed (the teachers) were actually in 403b plans. has spoken on these issues before, and it probably wouldn’t have hurt to have included them as part of the list of omissions in the Frontline piece.

  5. James Molet
    James Molet October 07, 17:54

    I have watched the documentary multiple times and I have never been left with the impression that individuals should abandon their 401(k). The warning by Brooks Hamilton noting that individuals need to save early and save more aside, the documentary could have offered a bit more in terms of individual responsibility. Ultimately however, I believe the documentary achieved what the producers claim was their intent; to make people more aware that they need to be more responsible in terms of managing their 401(k)s and a large part of that responsibility involves being aware of fees. Anyone that has taken the time to understand how time and compound interest work, understands that fees can be corrosive and everything else being equal, need to be minimized. Is the documentary perfect? No. However, it does focus attention on one area of retirement planning that needs attention.

  6. John Warford
    John Warford October 30, 03:01

    I am a Canadian who just finished watching “The Retirement Gamble.” I stumbled on to your site as a result of looking at Bogel’s calculation more deeply.

    As a software developer, I am going to call you on your “Link Bait” tactics.

    This article is nothing more than that the same type of subtle “guiding” that you financial types employ on your ill informed investment clients.

    You have conveniently provided links to like minded individuals, under the guise of supporting your argument.

    In reality, you are really just driving business to your pals via links conveniently embedded at the most opportune sections where the criticisms become so hyperbolic, people will be compelled to click.

    By the way, the notion that 2% is a misleading figure is laughable. I read your CV. You used to be a scientist. Surely you know that 2% is not 1%. How did you end up in this racket.

    I’ll follow Frontline any day of the week over this site.

  7. Christopher Carosa, CTFA
    Christopher Carosa, CTFA Author November 03, 00:08

    John, thanks for the comment. I’m sorry my article doesn’t conform to your views. I’m sure, since you know I’m a trained scientist, you could see my natural curiosity and need to test the hypotheses offered by the program. That the producer acknowledged some of the points brought up in the interview seemed to be of interest and satisfactory to many, if not most, readers. Clearly, this evidence did not sway you – not that there’s anything wrong with that.

    BTW, as a software developer, you used some terminology many of our readers might not be familiar with. I’ll attempt to explain them here.

    “Link Bait”: According to Matt Cutts, a software engineer who is currently the head of Google’s Webspam team, “Link bait” is “something interesting enough to catch people’s attention, and that doesn’t have to be a bad thing.” As a practical matter, it usually involves lists of data that can offer solutions to specific problems. You’ll see many media organizations (including, bloggers and web-site developers use titles that start something like “The 8 Best Reasons to..”, “The Top Ten Places to…” or “The 3 Things You Must Do Right Now to…”. Generally, folks don’t think of interviews as Link Bait. In this case, given the controversy of the Front-Line piece, an interview – especially the first published interview – with the show’s produced could be considered “something interesting enough to catch people’s attention.” It apparently has and, as the reporter who wrote the piece, I am honored that it did.

    As far as “subtle ‘guiding'” I would hope that I was not subtle at all. The Front-Line piece contained some, although as I wrote, non-malicious but still serious journalistic mistakes. It was my intention to make both the fact that they were non-malicious and serious quite clear to all readers.

    As far as providing links to “like-minded individuals,” if the reference is to the links I provided that discussed peer-reviewed academic papers, I would think it a compliment to refer to those independent researchers as “like minded.” Incidentally, this one-sided bias is precisely what I implied the Front-Line piece was guilty of. Don’t confuse this interview with a typical article. Usually, we make an attempt to get quotes representing all sides (something not entirely possible in all circumstances). In this case, we merely set out to disprove specific universal hypotheses. From the standpoint of logic, a single contrary fact will disprove a universal hypothesis (this is why, for example, the laws of physics are sometimes referred to a “universal” while theories of human behavioral are almost never referred to as “universal”).

    Now, the “driving business to your pals via links” was a bit of a poser. Since the links, for the most part, were to articles on research papers, I’m not sure how highlighting independent researchers could give them business. In the cases where I quote industry professionals, I am forced to admit, as much as I consider myself a friendly guy, my audience is much too large for me to consider myself a “pal” of every source. Indeed, and here’s a hint for those of you seeking to get quoted, in 95% of the cases, I use HARO to find sources. (HARO stands for “Help A Reporter Out” and its a national matching systems used by larger media outlets to find sources.)

    There, I think that takes care of all the “inside baseball” stuff of journalism and social media. Anything else – including Bogle’s 2% claim – will have to stand on its own merits. Remember, the article does not say there is not questionable practices going on in the 401k industry. Indeed, consistent with the entire body of work at, it focuses on the true issues, not the one’s that will merely sell the most newspapers or get the most television viewers. In the late nineteenth century, this practice of sensationalism (exemplified by the newspapers of both William Randolph Hearst and Joseph Pulitzer) was labelled “Yellow Journalism.” Yellow Journalism (think “the dark side of Link Bait”) is as much vilified today by honorable journalists as it is practiced today by nearly every successful media company.

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