Only a few short weeks after a group of independent researchers released a study showing the cost to 401(k) plans when vendors recommend affiliated funds, out comes a new study from Boston College's Center for Retirement Research exposed the true cost of 12b-1 fees to IRA investors. The first study suggested the ongoing conflict-of-interest of recommended affiliated funds may be costing retirement investors $1 billion a month. The second study stated, based on the 12b-1 conflict-of-interest alone, IRA investors lost $2 billion in 2009.
A billion here. A billion there. Pretty soon you're talking real money. How many more retirement dollars will be burned away until Washington acts?
Consider this: Robert Toth posted a rather interesting blog discussing the fiduciary conundrum caused by the use of 12b-1 fees. He quite correctly describes the origin of 12b-1 fees and the fiduciary function the mutual fund's board of directors has when deciding to offer a 12b-1 fee. Here, the fiduciary obligation requires 12b-1 fees be paid for marketing the fund, only when such payment is in the best interests of the fund.
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Christopher Carosa
Chris Carosa has been writing a weekly article and monthly column for BenefitsPRO online and BenefitsPRO Magazine since 2011 and is a nationally recognized award-winning writer, researcher and speaker. He’s written seven books, including From Cradle to Retire: The Child IRA; Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort; A Pizza The Action: Everything I Ever Learned About Business I Learned By Working in a Pizza Stand at the Erie County Fair; and the widely acclaimed 401(k) Fiduciary Solutions. Carosa is also Chief Contributing Editor of the authoritative trade journal FiduciaryNews.com and publisher of the Mendon-Honeoye Falls-Lima Sentinel, a weekly community newspaper he founded in 1989. Currently serving as President of the National Society of Newspaper Columnists and with more than 1,000 articles published in various publications, he appears regularly in the national media. A “parallel” entrepreneur, he actively runs a handful of businesses, including a small boutique investment adviser, providing hands-on experience for his writing. A trained astrophysicist, he also holds an MBA and has been designated a Certified Trust and Financial Advisor. Share your thoughts and story ideas with him through Facebook (https://www.facebook.com/christophercarosa/)and Twitter (https://twitter.com/ChrisCarosa).
