Many have recently learned for the first time that corporations have offloaded the decision-making for retirement portfolios on their (not always financially sophisticated) employees, but provided virtually no guidance. The 2008 market crash wiped out investors who had naively put their entire retirement savings in stocks and then sold out at the bottom in a panic. Just 14% of Americans are confident that they have saved enough to live comfortably in retirement.
A recent PBS special report on the matter includes a few details that are likely to be shocking to many non-experts, including the fact that 401(k) plans are not provided for free, as many participants believe. And some plans were set up by the mutual fund and brokerage companies who (no surprise here) populate it with their own funds and triple-dip, charging fees for managing the account, more fees for managing the funds, plus commissions for selling the funds to those naive plan participants. We learn what many professionals already know: that some people pay ten times more in fees drained out of their retirement plan than others.
Interestingly, the PBS report does not mention that help may be on the way. The U.S. Department of Labor, which sets the regulations for corporate retirement plans, has mandated that all retirement plans disclose, in writing, the various costs and fees that are being charged to plan participants. The DOL is working on proposals that would require those who give investment advice to plan participants to act in the best interest of the future retirees, and the proposal is expected to ban sales commissions. The requirement of putting the client’s interests first — known as the fiduciary standard –would extend to the IRA accounts that receive the rollover funds from 401(k) and other retirement plans.
Will the new rules ever be enacted? Few unbiased parties would argue with the idea that people receiving advice should be given unbiased and unconflicted advice, and that sales people should openly disclose the fact that they are selling rather than advising. The report which revealed this reality to millions of people, should help the Department of Labor in resisting the big money opposition to its efforts to fulfill the fiduciary standard for retirees.
Article written by Bob Veres
Sources:
http://www.lifehealthpro.com/2013/01/29/industry-girds-for-dol-fiduciary-rule