We have written about these issues in a variety of posts, “Avoiding The Wolf On Wall Street,” “Looking for a Financial Advisor? The “F” Word You Should Be Aware Of, etc.
As fiduciaries building portfolios for our clients, we pay a lot of attention to cost. As Kathleen points out so well, “An Extra 1% or 2% a Year in Commissions/Fees Can Destroy Your Nest Egg.” Many times success or failure with investing comes down to the costs associated with investing. We thought this article points out some very important issues in our industry, and is why you may want to consider an advisor committed to the fiduciary standard like Financial Freedom Planners.
Accredited Investment Fiduciary Analyst® for investment advisers, investment stewards, investment managers.
What Do Most Banks, Brokers, Mutual Fund & Insurance Cos Share?
By Kathleen M. McBride
What do many banks, brokerage firms, mutual fund companies and insurance companies have in common? They’re sharing $ Trillions in commissions and fees that come from retirement investor’s accounts over the years. It’s Your Retirement Savings, America!
They are admitting that they don’t put retirement investor’s best interests before their own – and they don’t want to.
And they are threatening to stop working with retirement plans and retirement investors if they are “forced” to put the investor’s best interests first, before their bottom line. Good! Let them stop giving poor, self-serving “advice” and misleading retirement investors. That would be good, because what they are advising retirement plans and investors to do is not good for the investors – it’s good for them! Read more about the threat, here: http://bit.ly/1HYXZqI
Why? Because the old retirement rules are broken.
The White House and the Labor Department want to fix these broken rules that date from the 1970s. The Labor Department proposed rules that eliminate conflicts of interest used by Wall St Banks, Brokers, Mutual Fund and Insurance companies to harm America’s hard-working retirement investors.
These brokers, insurance agents and reps — and their companies — are bleeding Americans’ retirement accounts of billions a year. How much? It ranges, from a conservative calculation of $17 billion a year (for one piece of the retirement market) to more than $100 billion a year — $1 trillion over 10 years — $2 trillion of retirement investor’s nest eggs, going into the pockets of banks, brokers, and mutual fund and insurance companies… $2 trillion buys a lot retirement dignity and security for retirement investors.
An Extra 1% or 2% a Year in Commissions/Fees Can Destroy Your Nest Egg
All it takes is an extra 1% or 2% more a year in under the table commissions or fees to take 25% or 50% from a retirement investor’s nest egg at retirement. The “advice” that saddles retirement investors with those (hidden) extra commissions and fees, is in the interest of the bank, broker, mutual fund or insurance company that provides it.
Retirement Investors: Are you willing to give up half of your nest egg for bad advice? How about 25% Of course not – but you probably didn’t know about it.
Annuities – The Gift That Keeps on Giving – To the Salesperson!
Also in the bad retirement advice hit parade are fees on annuities that can pay 10% or 20% to the seller – right out of the investor’s savings that they use to buy the annuity. An annuity takes the investor’s own money, and returns a portion of it to the investor, in pieces, month by month over the years. The insurance co keeps a lot of the investor’s money, typically 10% to 20%. Would any investor really do that if they understood the commissions and fees?
Banks, Brokers, Mutual Fund and Insurance Companies Still Want to Gouge Retirement Investors
Many banks, brokers, mutual fund and insurance companies still want to place their own interests before retirement investors’, as they have for decades, charging unreasonable commissions and fees in retirement accounts and during rollovers from 401(k)-type or pension plans, into IRAs. Yet, they claim if new DOL rules pass, those investors — the same investors that the Wall St firms have been harming all these years with tainted advice, and gouging with huge, unreasonable fees that can rob them of half of their nest egg — won’t have access to (tainted) advice. Good! Investors will then find one of the many fiduciary advisers who can help Americans save more effectively – with advice that’s in the investor’s best interest.
Fiduciary Investment Advisers Already Serve Retirement Investors
It’s important to note that fiduciary advisers who always put their client’s best interests before their own or their firm’s already exist, and have for decades. They already do provide fiduciary advice that is in the investor’s best interest. These are registered investment advisers, who are regulated by the Securities and Exchange Commission or their State – not by the insurance commissioner or FINRA – the broker-dealer association that regulates itself. They are legally held to the fiduciary standard whether they are managing an investor’s money or providing advice to that investor. The fiduciary ‘registered investment adviser’ (which is a legal term, not just a title) is not the same as a sales rep with a misleading title such as ‘financial advisor, investment or financial consultant, investment or financial counselor, wealth manager, VP’ or any of the many other titles that sound good but are just misleading titles for stock broker or insurance salespersons.)
To test whether your financial professional is a fiduciary, and places your best interest first, print this Fiduciary Oath and present it for her or him to sign. If they won’t, walk away and find a fiduciary investment adviser who will sign. The Fiduciary Oath:
If you think that extracting trillions from retirement investors’ accounts is outrageous, find your Senator or Congressional Rep and drop them an email telling them to support Labor Department’s “Investors First” Fiduciary rules so that you can retire with dignity and financial security.