In rare showing of bipartisanship, this past Tuesday April 2, a key Committee of the House of Representatives, the House "Ways and Means committee," unanimously approved a bill designed to address the "retirement income crisis" faced by so many Americans. After the "the Secure Act" was approved, Richard Neal, D-Mass, the Chair of the committee said: "Americans currently face a retirement income crisis, with too many people in danger of not having enough in retirement to maintain their standard of living and avoid sliding into poverty."
One big reason why retirement incomes fall short is the often-hidden fees that are charged on 401k and other retirement accounts. A study by the firm NerdWallet looked at the effect of investment fees on retirement accounts and found "staggering numbers." "Just like the accelerating effect compound interest has on the growth of savings, the same thing happens - only in the opposite direction - when investment fees compound." See How a 1% Fee Could Cost Millennials $590,000 in Retirement Savings, by Dayana Yochim and Jonathan Todd.
Retire Early or Work 3 More Years to Pay Your broker's Fees?
Another study concluded that:
"Fees charged on 401(k) plans can often appear to be deceptively low .... Although these fees as a percent of assets may appear small, over the course of a full working career, typical fees in 401(k) plans can reduce employee savings by 20 percent to 30 percent .... Calculated another way, employees would need to postpone retirement for up to three years to compensate for the lost investment income to 401(k) fees over a course of a full career." Building 401(k) Wealth One Percent at a Time - Fees Chip Away at People's Retirement Nest Eggs.
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Rodriguez Tramont & Nuñez, P.A. has collected millions of dollars for 401k retirement plan investors and other investors who were charged excessive mutual fund fees by their brokers.
]]>Over-charges in the sale of mutual fund shares have cost retirement plan holders and investors billions of dollars.2 In order to curb ongoing harm to investors the SEC set up a program that incentivized self-reporting by brokers and investment advisors.
The SEC found that, even though lower-cost mutual fund share classes of the same fund and representing an interest in the same portfolio of securities were available to their clients, the brokers and investment advisers placed their clients in higher-cost mutual fund shares that charged excessive and recurring fees. Those excessive fees were then deducted from the investor's assets. The fees, meanwhile, were routinely paid to the investment advisers in their capacity as brokers, to their broker-dealer affiliates, or to their personnel who were also registered representatives.
The advisory failures addressed in the latest SEC orders are just the most recent in ongoing findings addressing this harmful practice in mutual fund sales. Since 2013, the SEC and Financial Industry Regulatory Authority (FINRA) have sanctioned at least 100 broker dealers for similar fiduciary violations.
These kinds of fee structures create a conflict of interest between the advisors and their clients because the investment advisers stood to benefit from the clients' paying higher fees. Moreover, the SEC's Division of Enforcement, noted: "An adviser's failure to disclose these types of financial conflicts of interest harms retail investors by unfairly exposing them to fees that chip away at the value of their investments."
A 2015 Study by the White House Council of Economic Advisors concluded that "conflicted advice costs Americans about $17 billion in foregone retirement earnings each year."3___________
Rodriguez Tramont & Nuñez, P.A. has collected millions of dollars for 401k retirement plan investors and other investors who were charged excessive mutual fund fees by their brokers. If you are concerned that you have been overcharged and may have paid excess fees, call an attorney at Rodriguez Tramont & Nuñez, P.A. _______________________ 1 Firms Charged: