In late 2007, Ryan and Mike Alfred were running a fledgling advisory business in San Diego with $10 million under management, when their father, an estate-planning attorney, introduced them to a client, Dan Weeks. Weeks could make no sense of the dearth of information available on his 401(k) at Hewlett-Packard. Like all employee plans, it was subject to elaborate federal disclosure rules. Why were the data to analyze the HP plan properly unavailable? The lack of data on 401(k)s was a subject that also interested the Alfred brothers.

The first time Ryan and Mike met with Weeks, it was just to brainstorm. The Alfred brothers had been in the investment advice business for a relatively short time at that point. Ryan, then 25, was a recent graduate of Stanford University, while Mike, then 27, was a Harvard University graduate. In contrast, Weeks was a 25-year veteran of HP who held five software engineering patents. Despite the age difference, the three got along well. Moreover, they agreed on one important idea: Creating transparency in the $4 trillion invested in qualified plans-the main retirement savings vehicle for nearly 60 million Americans-represented a huge business opportunity.

"Dan had wanted to start a participant advice company," says Ryan. "Mike and I weren't interested in that business and convinced Dan to switch gears and think bigger. After Mike and I came up with the idea of rating 401(k) plans, we formalized our relationship with Dan." In February 2008, they incorporated BrightScope Inc.

Thus began an incredible tale of American entrepreneurship, of a company busting open ugly secrets of the 401(k) business, of a company on the verge of transforming the business of advising 401(k) plans.

Weeks, BrightScope's president now, would be "Mr. Inside." Boy geniuses, Mike and Ryan, would be the front men-articulate and energetic subject matter experts. During the spring of 2008, the trio raised $900,000 from friends to seed the venture. In the meantime, Ryan and Mike did their homework.

In the summer of 2008, the brothers recalled during a recent telephone interview, they flew to Washington, D.C., with the express purpose of visiting the first floor at 200 Constitution Avenue N.W., which houses the Public Disclosure Room of the Employee Benefits Security Administration (EBSA). EBSA is a division of the Department of Labor. The reference librarian was friendly. DOL data are like a haystack, however, and Ryan and Mike needled the clerk with questions for about 30 minutes. Then, Mike asked if they could go behind the librarian's desk to look at his computer screen. The rest is history-and the future of the 401(k) business.

Within minutes of cajoling the DOL librarian into letting them commandeer his computer, Ryan and Mike discovered a goldmine-a vein of data so rich they believe it could make BrightScope a billion dollar company. Turned out, 401(k)s with more than 100 employees must be audited and submit an annual audit report, which is attached to a Form 5500. The DOL, the Internal Revenue Service and the Pension Benefit Guaranty Corporation jointly developed the Form 5500 so employee benefit plans could satisfy annual reporting requirements under Title I and Title IV of ERISA and under the Internal Revenue Code. Form 5500 is widely known to plan sponsors and advisors. The audit report, however, was a hidden and unexpected treasure.

The audit report, a document ranging from 20 to 500 pages in length depending on a plan's complexity, contains all of the design details about a plan-management fees, total assets, asset allocations, vesting schedules, contribution-matching structure, and a raft of additional information.

While discovery of the audit reports was a breakthrough, it was not enough. DOL was unequipped to distribute the information in the audit reports. Data in Form 5500 submitted by plans, Ryan says, were scanned by DOL and optical character recognition transformed that information into a database. The precious data in the audits had languished unused for years.

"The audit reports just sit there," says Ryan. "They [DOL] don't scan them, they don't do anything with them. They just sit there basically as a digital image." Making matters worse, you could get at this detailed plan data only by photocopying each individual audit report, at five cents a page. The information was not electronically available!

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