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Greg Carpenter

By: Greg Carpenter on June 5th, 2013

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Follow the Money on 401k Fee Disclosures

401(k) Fees | Fiduciary Responsibility

I recently read a story on titled, “401k Disclosures Not Working For Investors.” The article made the point that participant fee disclosures are at best confusing, and at worst, completely ignored.

Friends, it should come as no surprise that I am in favor of more 401k fee disclosures, presented with total clarity. As I have blogged about many times in the past, hidden fees eat away at retirement savings. And these disclosures have got to be crystal clear. All the information in the world won’t help you if it’s written in a language you don’t understand. Are we getting either with the current fee disclosure regs?

No. Here’s why -

Joshua Itzoe, a Certified Financial Planner (full disclosure: Employee Fiduciary has common clients), was interviewed for the story. Here’s an excerpt:

The fee disclosure forms are "the retirement industry's version of Y2K," according to Itzoe. "The anticipated impact was much more than what actually came to pass. I don't think the forms worked as anticipated."

Itzoe is particularly disappointed that fees are expressed as a dollar figure for every $1,000 invested. That means participants must perform various calculations to arrive at their total fees from a percentage standpoint, he says.

"That's the best we can do for people?" he asks. "How many people actually did that work?"

If 401k fee disclosures aren’t working for plan participants OR financial advisors...who exactly are they working FOR?

Answer: follow the money. The winners are those who continue to receive high fees. To turn the old Lending Tree mantra on its head: When investment managers obfuscate, you lose.

The frustrating thing is that we can call them out. Being frugal means having a healthy level of skepticism. Unless you know you are getting a good deal on your investments, I would argue that you are not. Ask the questions - just because the disclosure is compliant does not mean that we must be complacent!

Check out this piece that aired today on NPR. Uri Berliner works his way through an investment choice. Great basic information. His choice - low cost passive investments. It’s well worth the listen as several experts guide him through the process. Uri and the Planet Money team do a great job of taking complex financial concepts and make them understandable.

Raising a little heck is a very frugal thing to do.

Have a thought you want to share about 401k fee disclosures or the Berliner segment mentioned above? Drop it in the comment box and let’s talk.


About Greg Carpenter

Greg Carpenter founded Employee Fiduciary in 2004. With 29 years of experience in accounting and finance, Greg has brought his expertise to a variety of advisory, senior and executive management roles. Greg has worked for a national accounting firm, a Fortune 500 plan sponsor, a major brokerage firm, and he served as the CEO of a major 401k TPA firm. He is a CPA and earned his BA from Yale and his MBA from The University of Chicago Booth School of Business.