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.

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.

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).

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.

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).