BrightScope: What You Get Besides 401(k) Ratings

What Is BrightScope?

BrightScope is a financial information company that primarily helps retirement market-focused asset managers identify, target, and retain clients. It is best known for its 401(k) rating system and ability to convert floods of data into simplified, actionable intelligence for paying subscribers.

Key Takeaways

  • BrightScope is a financial information company best known for its 401(k) rating system.
  • The company was founded in 2008 and started out with a mission to improve the transparency of employer retirement plans.
  • Several years, acquisitions, and managerial changes later, it now primarily helps retirement market-focused asset managers identify, target, and retain clients.
  • After Institutional Shareholder Services Inc. (ISS) acquired Strategic Insight, BrightScope’s services were lumped together as part of the Beacon enterprise product suite, which is available to paying subscribers only.

Understanding BrightScope

BrightScope has pivoted its business substantially over the past few years. Following a series of ownership changes, the company’s priorities switched from supplying the public with independent research on their workplace retirement plans, financial advisors, and mutual funds to primarily helping asset managers leverage their data in order to drive more targeted and effective distribution efforts.

Early Beginnings

BrightScope was created in the late 2000s to make it easier for people to better understand their 401(k)s. Its three co-founders, Dan Weeks and brothers Mike and Ryan Alfred, recognized from personal experience how hard it was to determine the quality of a company’s retirement savings plan and vowed to end those struggles by building a database that would give each 401(k) a rating based on things like fees and match.

After raising some money from angel investors and heading to Washington, D.C. to extract company 401(k) plan filings from the U.S. Department of Labor, the three got to work building their invention. They gave as many 401(k)s as they could analyze a numerical score based on hundreds of individual data points, including the plan’s total cost, company generosity, and the number of investment choices available, and made their creation free for the public to access.

The Alfred brothers—fresh from previously operating an investment advisory business—and Weeks followed this up by creating the first comprehensive and publicly available online directory of financial advisors. As with the 401(k) ratings, the goal was to help people find the best financial solutions while making some money from the folks on the other side of the fence.

BrightScope charged a fee to advisors who wanted to stand out in the directory and look into who checked out their profile. Other revenue streams came from Spyglass, a 401(k) database used by retirement plan consultants and advisors to help smaller employers optimize their retirement offerings, and Beacon, which specialized in giving asset management companies data on which employer retirement plans own their funds and which employers own competitor funds that haven’t been performing well.

BrightScope initially charged advisors to access and add details to their profiles, but it was forced to reverse this policy after receiving lots of complaints.

Old BrightScope vs. New BrightScope

A series of acquisitions gradually led to a shift in BrightScope’s business model and priorities.

In 2016, the company was acquired by New York-based Strategic Insight for somewhere reportedly in the region of $35 million to $40 million. Then, within the space of three years, the Alfred brothers—who, between them, effectively ran BrightScope—left to pursue new ventures. Strategic Insight was acquired by proxy advisor Institutional Shareholder Services Inc. (ISS).

Mike and Ryan Alfred set up Digital Assets Data, a data platform for cryptocurrency assets, after leaving BrightScope.

Under the stewardship of its new owner, the free stuff started to vanish. BrightScope’s services were lumped together as part of the Beacon enterprise product suite, which was made available to paying subscribers only. In other words, BrightScope’s defined contribution retirement plan database and financial advisor directory were no longer free to access. There are now other websites that help employees analyze company 401(k) plans, including one called Beagle.

Fee-based services make access to information difficult for those who can't afford it. Unfortunately, because Brightscope made the shift from a free service to a fee-based service, it now excludes different groups of people who could benefit from its service.

Who Came Up With the Idea for BrightScope?

According to an article from The New York Times, the idea originated with Dan Weeks. Weeks was reportedly struggling to understand his 401(k) plan while working as an engineering manager at Hewlett Packard. He came up with a tool to better organize his risk tolerance and fund choices, and then showed it to his real estate lawyer, who happened to be the father of the entrepreneurial-minded Alfred brothers.

What Is a Good Rate of Return on a 401(k)?

That depends on which assets you’re invested in and how they perform. Returns are never guaranteed, but history has shown that the market can return an average of 10% per year over the long run. If you're 401(k) tracks an index, you may see similar returns.

Who Owns BrightScope?

BrightScope has been owned by Institutional Shareholder Services Inc. (ISS) since 2019 and forms part of its market intelligence division.

The Bottom Line

Since 2016, when it was acquired by Strategic Insight, BrightScope moved from being a free information service with databases that allowed consumers to compare 401(k) plans and find financial advisors to a paid service designed to help retirement market-focused asset managers identify, target, and retain clients. It is now owned by Institutional Shareholder Services (ISS).

Article Sources
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  1. The New York Times. “Spotlighting 401(k) Plans, Thanklessly.”

  2. Business Wire. “Strategic Insight Acquires BrightScope to Broaden Its Portfolio of Proprietary, Data, Insights and Business Intelligence for the US Retirement Market.

  3. RIABiz. “Mike Alfred Also Exits BrightScope to Follow Brother Ryan into Cryptocurrency Sphere.”

  4. Institutional Shareholder Services. “Institutional Shareholder Services Announces Acquisition of Strategic Insight.”

  5. PR Newswire. “NYDIG Announces Acquisition of Digital Assets Data.”

  6. The Washington Post. “Your 401(k) Is Pocketing Fees on Your Investment. Many People Don’t Realize It.

  7. U.S. Securities and Exchange Commission, Office of Investor Education and Advocacy. "Saving and Investing: A Roadmap to Your Financial Security Through Saving and Investing."

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