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Bill to Aid 401(k) Participants - I DON’T LIKE IT!
By JLP | August 3, 2006
According (NOW FREE!) to the Wall Street Journal:
The Pension Protection Act, which is under consideration in the U.S. Senate this week after passage in the House late Friday, would let 401(k) providers like mutual funds, brokerage firms and insurance companies help workers choose specific funds for their retirement accounts.
Here’s the concern:
Some independent financial advisers see a conflict of interest for firms that could recommend their own funds.
I’ll second that! I think offering advice is fine and probably much-needed. However, there’s a huge conflict of interest if that advice is coming from the very people who are administering the plan. Do you think a representative of Merrill Lynch is going to recommend anything other than a Merrill product? I also see lots of potential for retirees to be directed into high-fee annuities, which will be a boon to the advisor but most likely not in the best interest of the retiree.
Here’s one last quote from the article that stresses my concern:
“Everything that has happened in the securities industry the last five years, all these scandals, at the heart of it was a conflict of interest,” says David Kudla, chief executive of Mainstay Capital Management, a Grand Blanc, Mich., firm that manages about $500 million in retirement assets for individuals. “Given the regulatory track record, how can anyone think this is a good idea?”
I think companies should beef up their education efforts and make it an annual requirement FOR ALL EMPLOYEES to go to. I also think that EVERY employee should receive a statement telling them how much they have, how much they should have, and how much they will need at retirement, which would make it more difficult for them to bury their heads in the sand. Kinda like that seatbelt light in your car that keeps flashing until you buckle your seatbelt.
Topics: 401(k), Investing, Retirement Planning, Roth 401(k) |