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Like a swarm of locusts, so-called "target date" and "lifestyle" mutual funds will soon have consumed up to a third of the $3 trillion of assets in 401(k) accounts across the country. Can this be good for investors? Probably not.

Any concept heavily promoted by the financial services industry should be immediately suspect.

Lifestyle funds offer a set mix of stocks, bonds and cash that accommodate people with conservative, moderate or aggressive investment objectives. The final "lifestyle" choice is "retirement income." Apart from lifestyle funds, target date funds differ in that the mix of stocks, bonds and cash will change over time as the investor approaches the target date.

Presumably, the target date is the year someone expects to retire. For a retirement 20 years from today, we would be choosing a fund called "Target 2030," and it would be primarily invested in stocks. Then, it would move progressively toward bonds over the next 20 years.

For the uninitiated, these are "set-it-and-forget-it" investments that are designed for (in Vanguard's own words) "initial investors, not experienced or sophisticated investors", people who may not want to think about their investments for as long as 45 years."

The question is, "Do these funds accomplish what they imply, or do they become yet another feeding trough for the industry at the expense of 401(k) participants?"

Sen. Herb Kohl, D-Wisc., is concerned about what he sees as a failure of the concept. His concern was heightened after a collection of funds scheduled to start providing retirement income in 2010 had losses ranging from 4 percent to 32 percent in 2008. This prompted him to start looking at the layers of fees and the vastly different risks that each fund family offered.

How are these funds abused? First, there are additional fees. A fund company will be using some mix of the funds it has available to the public as stand-alone investments, and then it will be adding additional fees for the chore of deciding what mix of those funds should make up the target fund. In some cases, a fund family will use its target or lifestyle mix as a way to find a home for one or more of its newer, less-popular funds (its "dogs," if you will), which can be unloaded on the "unsophisticated."

Conceptually, a target-based mix of investments has to assume that all of an investor's assets are in that fund for the mix to make sense. If investors have chosen a lifestyle fund for their current 401(k), but they have a smattering of investments in several IRA's scattered around town, not to mention the equity in their home, then the careful analysis arriving at the target-based mix may make no sense.

The real downside of these funds is that they offer an excuse for 401(k) participants to remain financially clueless.

Sen. Kohl helped to start Kohl's Department stores, an institution that began with a family grocery store. He's aiming his guns at the institutions which will soon have to adhere to a fiduciary standard if the senator has his way, a standard that holds a firm legally liable if they fail to make decisions that are in the sole interests of the investor.

Right now, there is only a "suitability" standard, which means that you can sell anything as long as it is deemed to be "suitable." Since most of today's financial advisers or brokers wouldn't be caught dead buying a target or lifestyle fund, they will be hard pressed to meet their obligation as fiduciaries after steering participants into these highly profitable funds.

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