Are You Being Robbed?

Every advisor has sat across the table from a potential client, recommended rolling over a 401(k) and been hit with "but in my 401(k) my assets are managed for free."

Here's the news flash:  "WALL STREET DOES NOTHING FOR FREE."

Thinking that your assets are managed for free is naivety at its highest.  It's akin to the stock investor who thinks he (usually it is a male) has done well when his portfolio is 12% higher when stocks have risen 30%.

Having said that, it is understandable because investment management services are not charged in the same way as just about everything else in our universe (as well as other universes that support life) is charged.

A great explanation is given at:

"A Simple Change That Would Help Millions of Investors" by Morgan Housel at The Motley Fool.

In the article, Housel presents some sobering facts:

• Fidelity earns more per customer than Apple
• the average two-earner couple will pay $155,000 in 401(k) fees over their lifetime
• According to a study by industry researcher LIMRA, 22% of 401(k) participants think they don't pay any fees or expenses
• Ned Johnson, the son of the company's founder, is worth $9.3 billion, making him the 47th richest man in America.

The article focuses on Fidelity; but, in truth, Fidelity is one of the better 401(k) providers.  They offer inexpensive, well-diversified index funds.  Administrators who are even a bit savvy can offer attractive funds to participants.  In turn, participants who learn a bit about funds can avoid the $155,000 hit mentioned above.  This isn't true, unfortunately, for many other providers!

I, along with many others, have long been appalled at Wall Street's exploitation of America's workers via the 401(k)s and other investment services.  By taking advantage of a complex situation, Wall Street has, IMHO, robbed workers of a goodly portion of their nest egg and contributed significantly to what will soon be seen as a retirement crisis.

My approach has been to insist that my services be paid for by clients writing checks.  A bit of extra work on the part of the client?  Sure, but they know exactly what they are paying for my services.

I found the above article at:

Dough Roller Money Tips

a site that presents articles from around the web that are of interest.

News flash for the bank robber:  it is easier to rob with a pen than with a gun.