Beware the Fees

According to a report in Bloomberg News, hidden fees in 401(k) plans can sap your earnings for retirement.  Many times there are fees in these investments which are never openly disclosed to the employee/investor, and the employee/investor never sees them in statements or reads about them in disclosure documents (who could read all of that fine print anyway?). 

What are these fees for?  Record-keeping, legal services, toll-free telephone numbers, office rent, theatre tickets (yes), trips and fancy meals for money managers, and trading commissions.  The U.S. Department of Labor lists 17 distinct 401(k) fees.  If these fees total one percent (1%), they can reduce returns by fifteen percent (15%) over thirty (30) years according to Stephen Butler, president and founder of Pension Dynamics Corp.  Greg Kasten, a financial planner at Unified Trust Co. states that the most an investor should pay for a 401(k) is one percent (1%). 

When fees are not disclosed to investors, it is like stealing investors’ money.  This is why arbitration hurts.  When NASD arbitrators decide claims brought by investors over such misrepresentation, it is like the fox guarding the henhouse.  Wouldn’t these companies be more accountable, if they thought they might have to explain to a jury why the fees for travel and entertainment were hidden?  I suggest they would.  As it is, the National Association for Securities Dealers (NASD) arbitrates investor disputes.  Which would you rather have if you paid excessive fees on your hard earned money, a jury of your peers or an NASD arbitrator?

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