mutual fund

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Does Your Financial Advisor Owe You Money? – Breaches of Care

In my previous post, I discussed the applicable standard of care that financial advisors owe their clients. In this post, we will discuss some of […]

Does Your 401k Plan Owe You Money?

Short answer – probably.

Fred Reish, one of the nation’s most respected ERISA attorneys, has publicly testified that few 401k /404c plans are in full compliance […]

401(k) Investment Fees: One Fund, Six Fees?

401(k) investment fees continue to be a key concern, both in terms of fiduciary liability and impact on plan participants. What some are overlooking is […]

Why are Investment Surrender Charges so High?

First of all, sales reps say you will never pay the surrender charge or penalty for early withdrawal because you intend to hold the investment for at least seven years. That is true on the day you buy the investment – you have no intention of selling it that day. But, it is not true one year later when you determine the investment product (mutual fund, annuity) is under-performing and charging excessive fees. You determine you could do a lot better elsewhere, but you have to pay a 6% penalty (one year has elapsed) to move your assets.

Why are surrender charges just a big number? As you may know, investment product companies still pay the sales rep a 5% commission even though the assets are not deducted from your account. In effect, the product company is front-ending the commission payment to the advisor. The product company needs time to recover the commission payment. Most of the reputable companies charge early withdrawal penalties for seven years. They have that length of time to recover the commission payment and they are protected by the surrender charge if you decide to leave early. […]

The Compensation Methods of Financial Advisors Matter a Lot!

Savvy investors do not buy investment products from sales representatives (reps). They select “real” financial advisors who have the specialized expertise and services they need to help them achieve their financial goals. This is a far cry from reps who want to sell mutual fund products that pay 5% commissions. Regardless of what reps say in their sales pitches, astute investors should know reps, who are paid at the time of the sale, have no economic incentive to help them achieve their financial goals.

If you are a savvy investor you should pay fees to a financial advisor for his knowledge, advice, and services. If you become dissatisfied with the advisor’s results you can terminate the relationship and the advisor’s compensation stops. This is a powerful incentive that motivates advisors to help you achieve your goals.  […]

Investment Expenses Can Wreck Your Retirement Plans

On August 30, 2012 401k plan sponsors (companies, trustees) are required to disclose all plan expenses to plan participants. Expenses are a very big deal because every dollar of expense is one less dollar participants have available to reinvest for their retirements. It is in participants’ best interest to understand ALL of the expenses that are deducted from their accounts for three reasons:

1. Expenses may be excessive in relation to investment performance.

2. Expenses reduce participants’ net performance.

3. Participants may have to defer retirement dates due to high expenses and poor net performance. […]