Gary Rathbun has never done much 401(k) business, but with the Pension Protection Act trumpeting fee disclosure and fiduciary liability, Rathbun felt the opportunity was too great to miss.

The president and founder of Private Wealth Consultants, an RIA in Toledo, Ohio, Rathbun has been on a tear for the last 2 months. His firm has brought in $10 million in 401(k) assets since July, and he is so confident about his approach that he's set his sights on $100 million within 12 months. His secret? Low-cost plans using ETFs instead of mutual funds, and an emphasis on the trust and accountability that comes with a fiduciary relationship.

Rathbun says it all started when he began reading more deeply into the Pension Protection Act. Simultaneously, the Department of Labor was talking about fee disclosure and costs. "We're an RIA, so we're used to making full-disclosure of our fees and taking on fiduciary responsibility, but the Department of Labor was also talking a lot about expenses," he says.

A fan of ETFs, Rathbun started looking into ways he could create retirement plans using them. He says he rarely uses mutual funds unless a client demands it. Rathbun, who is affiliated with Schwab Institutional, says he had difficulty getting any firm to provide him with ETF trades for less than $5—even Schwab. That’s when he came across BenefitStreet, a San Ramon, California-based company that handles $8 billion in retirement money for 7,100 corporate plans. Benefits Street is an automated, web-based administration platform provider for 401(k) and pension plans.

While a typical stock ETF charges about 40 basis points of assets in annual expenses, Rathbun says his agreement with BenefitStreet gets him unlimited trades for 25 basis points a year. “I charge 75 basis points for my services, so it’s a neat 100 basis point charge to the client that he can see and easily understand,” he says.

Rathbun thinks he’s found a solid niche. Whether he meets his goals or not, he is largely alone in his use of ETFs in 401(k) plans. Just over half of the money in U.S. 401(k) plans was invested in mutual funds at the end of last year, according to the Investment Company Institute, followed by investments in products offered by insurance companies, banks and other institutions. The $1.49 trillion of mutual fund assets in 401(k) plans represented roughly 14 percent of total mutual fund assets in the U.S. at the end of last year. And while ETF assets are now around $500 billion, up from just over $65 billion in 2000, less than 1 percent of the total assets in 401(k) plans are estimated to be in ETFs.

But a marketing edge is a marketing edge. Studies show that over time, low-cost products build larger nest eggs, and Rathbun likes his chances in the market—especially among competing brokers at wirehouses and insurance firms where “fiduciary” is still a worrisome word. All he has to do is find the clients. Beyond discussing his new capabilities with his own clients, finding disgruntled pension plan and 401(k) plan sponsors isn’t as difficult as it may seem, he says. Every retirement plan sponsor must file a Form 5500 (a detailed annual report required of ERISA plans with more than 100 participants) to the IRS. The reports are made public at www.freeerisa.com, but sifting through the data can be cumbersome. He wanted to hunt for potential clients by finding all those that were paying a lot more for their service than he was going to charge.

He opted for Larkspur Data (visit their Web site here), which allows the user to sift through 5500 filings using various screens. “It was simple, we essentially started searching the database for plans in certain areas with expensive group annuities,” he says, “low hanging fruit.” Some of the plans had expense ratios as high as 2.8 percent, says Rathbun. For a guy that once eschewed 401(k) business entirely, the past two months have yielded phenomenal results. “We haven’t been told ‘no’ yet,” he says of the 15 small retirement plans he now looks after.

But it’s not all cost, he says. Rathbun’s fiduciary background alone has definitely won him some clients. The CEO of a small pension account worth $1.3 million recently agreed to switch his plan over to Private Wealth Consultants. “I said to him ‘You’re the trustee of the plan, do you know what responsibilities come with that?’ He said to me he knew nothing about it,” says Rathbun, who enlightened the company founder on the duties and obligations of each person in the agreement. And Rathbun is schooled in fiduciary responsibilities: He’s not only an RIA, but an Accredited Investment Fiduciary (AIF) as well. He earned the title through a 30-day online course developed by the Foundation For Fiduciary Studies, a not-for-profit organization created to advance the practice standards of care for investment fiduciaries (click here to read about the foundation and its training program). “We’re not selling rate of return in these plans,” he says. “We’ve built our marketing advantage around low costs and the benefits of a fiduciary relationship.” And so far, it’s working.