DOL's disregard for its precious data was an affront to plan participants, and Ryan and Mike knew that systematically tapping it was critical to BrightScope's success. "Basically, we went to the department and said, 'You've got all this great data. You're not doing anything to process it,'" says Ryan. "'Just give it to us and we'll do all that hard work. We'll do the evaluation on clients, we'll empower people in the marketplace to identify problems and fix them.'"
Getting a federal agency like DOL to change its ways, however ill-conceived, is no easy task. The brothers filed Freedom of Information Act requests and met with key senators to try to pry loose the audit report data in a user-friendly format. It took a year of going back and forth with DOL, but they've largely succeeded. DOL now makes the data available in a digital format that BrightScope-and the public-can consume and analyze more easily.
"It's slightly more accessible, but there is still a tremendous amount of processing to get the information into a database," says Ryan.
The Alfreds take no credit for helping change DOL policy on distributing data on 401(k)s. They say that DOL was already examining ways to make its data on 401(k)s more accessible when they showed up. But the Alfred brothers' timing and persistent focus has borne results. The Alfreds have played a role in the "Googlefication" of DOL data on qualified plans.
"The big change, which is called EFAST2, was already in the works back when we were requesting the data," Ryan says. "The major shift that occurred wasn't a result of our pressure, but certainly their [DOL's] sensitivity to FOIA requests, their ability to respond to FOIA requests of this nature, has improved dramatically because of the volume of data we've requested and our ability to work with them to streamline that process for them."
Since Ryan and Mike went to Washington two and a half years ago, BrightScope has shot to national prominence in a dizzying media blitz. The brothers say they want BrightScope to become "the Morningstar of 401(k)s," and they are off to a great start in achieving that goal. In fact, the stunning rise of BrightScope is like Morningstar all over again.
I remember meeting Don Phillips, now president of Morningstar's Fund Research division, in 1986 for the first time with a couple of other mutual fund analysts in a New York hotel lobby. I was a reporter for The New York Daily News and Phillips was doing a nonstop dog and pony show for the press about Morningstar's research and five-star mutual fund rating system.
Fast forward to my phone call last month with Ryan and Mike; the Alfreds are giving me a tour of BrightScope.com and, like Morningstar 25 years ago, BrightScope is going direct to consumers first. It's the same formula that Morningstar founder Joe Mansueto used in the early 1980s to outmaneuver other mutual fund research companies. As with Morningstar a quarter century ago, winning investors is necessary if BrightScope is to become the data and research service advisors, plan sponsors, and plan consultants must rely upon.
When Morningstar was founded, Lipper Analytical, Weisenberger, and a few other vendors already dominated the mutual fund data and research business. Mansueto, with fund expert Phillips serving as Mr. Outside, popularized the fund research business and made it understandable to investors on Main Street with the five-star rating system.
Similarly, the BrightScope Rating report is free. By offering a free BrightScope Rating report on any plan with more than 100 employees to anyone who visits BrightScope.com, the company is creating awareness of the rating among investors. Just as star ratings became the metric used by investors for mutual funds, a BrightScope Rating could thus become the trusted tester preferred by America's 401(k) plan participants.
Any company can compile the DOL's public data on 401(k)s and create research reports and ratings based on automated or human analytics. Though the Alfreds appear to have been the first to mine data in audit reports, DOL data are public and anyone can access it.
BrightScope's success hinges on its ability to use DOL data to deliver value-added analytical reports on 401(k)'s to investors, sponsors and advisors and build a recognized brand around the quality of its reports. Time to market and brand awareness are crucial. So, just as Phillips became America's favorite mutual fund analyst when Morningstar was founded, the Alfred brothers are on their way to becoming the nation's most quoted experts on 401(k)s.