Active money managers look to outperform an appropriate benchmark through decisions which could include economic sector positioning and weighting, security selection and weighting, tactical trading, and other subjective criteria.

Variations in investment approaches and styles vary greatly in the financial industry. Nevertheless, the objective of all active approaches is to generate better returns for a comparable investment. You generally pay active managers higher management fees to compensate them for their resources, time, and effort involved in getting you, the investor, returns that beat the benchmark. 

When this type of management is used in the 401(k) market, a portion of these fees are usually passed through to service providers to cover the costs associated with the plan. This is also sometimes referred to as "revenue sharing," which is more accurately a reimbursement for expenses for services the recordkeeper performs on behalf of the mutual fund company.

On the other hand, passive management, at the fund level, doesn't forecast the stock market or the economy, and makes no effort to distinguish "attractive" from "unattractive" securities.

Passive managers often construct their portfolios to mirror the performance of well-recognized market benchmarks such as the Standard & Poor's 500 Composite Index (500 large U.S. companies), Russell 2000 Index (2,000 small U.S. companies), or Morgan Stanley Capital International EAFE index (large international companies).

Passively managed funds typically have a lower cost than actively managed funds and, in exchange, the investor loses the ability to take any action in response to market conditions. 

Additionally, the investments used in a passive management approach must be allocated by asset class (stocks vs. bonds), market (domestic vs. international), and various sub-classifications. The advisor who makes these allocation decisions will charge a fee for these services that generally represents a percentage of the assets. 

In the context of a 401(k), since fees are separated out more distinctly, the revenue sharing that happens in an active management philosophy can be returned to the 401(k) plan itself, sometime referred to as return of mutual fund concessions. 

Financial advisors generally fall into one of these two philosophical camps, although some take a hybrid approach of the two. 

In the 401(k) market, financial advisors should expect a recordkeeper to be able to offer platforms that compliment either investment philosophy. 

The decision should be based on what best suits the needs of their client, the plan sponsor. 

For example, one industry recordkeeper has three separate platforms to choose from.

Two of the platforms are completely open-architecture, with an offering that supports both commission-based advisors and fee-based advisors, whether they choose to use an active or passive investment style. 

In addition, there is also an option to pass mutual fund revenue sharing through to the 401(k) plan participants. 

Special care should be taken by a plan sponsor or anyone charged with evaluating and comparing retirement plans, when a 401(k) recordkeeper, TPA, or other service provider strongly advocates for one type of investment philosophy over another. 

It simply isn't their debate to wade into.