{"id":6684,"date":"2013-07-26T11:39:41","date_gmt":"2013-07-26T18:39:41","guid":{"rendered":"http:\/\/www.marketriders.com\/investing\/?p=6684"},"modified":"2016-12-21T07:28:29","modified_gmt":"2016-12-21T15:28:29","slug":"meet-the-yale-prof-ripping-the-lid-off-401k-fund-fees","status":"publish","type":"post","link":"https:\/\/www.marketriders.com\/investing\/meet-the-yale-prof-ripping-the-lid-off-401k-fund-fees\/","title":{"rendered":"Meet The Yale Prof Ripping The Lid Off 401k Fund Fees"},"content":{"rendered":"

A Yale researcher has the the retirement industry up in arms over his plan to publish apples-to-apples fund fees comparisons of thousands of\u00a0401k plans<\/a>\u00a0across the country.<\/p>\n

No mere exercise in academia, he wants action, sending letters to plan sponsors warning that they’ll be exposed as “high cost” unless they add low-fee products.<\/p>\n

The\u00a0Labor Department<\/a>\u00a0moved in 2012 to require plans to report fees to retirement savers. Now Ian Ayres, a law professor at Yale, is demanding that the plans change their practices or end up identified in his research as a “high cost” plan.<\/p>\n

\"fund<\/p>\n

According to the website\u00a0RIABiz<\/a>, the letter reads in part:<\/p>\n

\u201cUsing data from the form 5500 your company filed with the Dept. of Labor in 2009 and BrightScope Inc. I have identified your plan as a potential high cost plan. We recommend that you improve your plan menu offerings, including adding lower fee options, both at the plan and fund level, and consider eliminating high-fee funds that do not meaningfully contribute to investor diversification.\u201d<\/p><\/blockquote>\n

Harassment charge<\/strong><\/p>\n

Besides the paper, Ayres is promising to take his results to social media via Twitter as early as this coming spring. Considering the entrenched relationships between plan administrators and investment funds, that’s almost no time act. Expect investor lawsuits and Congressional hearings, reports RIABiz.<\/p>\n

Plan advisers call the professor’s tactics “harassment.” Another way to look at it is that it’s the natural result of doing business “in the sunshine.”<\/p>\n

Many states have “sunshine” rules that require publication of proposed laws and regulations. In short, voters must be informed clearly and simply of what’s going on in their legislatures.<\/p>\n

In practice, nobody spends their hours reading public notices \u2014 except newspaper reporters. In the case of\u00a0hidden 401k fund fees<\/a>, the release of customer cost data are the crown jewels for anyone with the inclination to examine what’s going on. Enter Professor Ayres.<\/p>\n

Fees and performance<\/strong><\/p>\n

It’s clear why plan advisers don’t want this data published on a comparison basis. It begs the uncomfortable question of why\u00a0high adviser fees<\/a>\u00a0don’t necessarily correspond to better performance.<\/p>\n

Such publicity threatens to shake out the industry. As it is now, millions of working Americans pay fees that are much higher than necessary for sub-par performance. That would change if enough people realized the impact fees have on their own\u00a0retirement<\/a>.<\/p>\n

The simple fact is, high fund fees eat up 32% or more of your return over 30 years. The longer you stay invested, the worse it gets. If mutual funds consistently beat\u00a0index funds<\/a>\u00a0paired with a simple\u00a0asset allocation plan<\/a>, they would be worth paying for. But that’s not what happens.<\/p>\n

Instead, actively managed funds often lag the market substantially, largely because of the drag created by\u00a0high fund fees<\/a>. Investors figure this out over time, but often so late \u00a0it doesn’t matter: They lose, and\u00a0Wall Street\u00a0wins, again.<\/p>\n","protected":false},"excerpt":{"rendered":"

A Yale researcher has the the retirement industry up in arms over his plan to publish apples-to-apples fund fees comparisons of thousands of\u00a0401k plans\u00a0across the country. 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