An illustration of why, exactly, fees have taken center stage in the 401k and retirement industries (and made tort terrors like Jerome Schlichter very happy) can be answered by one reporter’s recent quest to find her investment costs.
Not just any reporter, but one from The Wall Street Journal, who is presumed to be somewhat familiar with the inner workings of the financial services market mechanism. Indeed, it’s the premise for the piece, and as expected, doesn’t go well, making the company, her advisor and the industry as a whole look just awful.
After a cursory call to customer service at her investment provider, she was told she pays a $125 annual flat fee.
“Alarm bells went off. ‘That’s it?’ I asked. That can’t be it. I assumed there was a percentage charge on my investments. He laughed. ‘We’d love to charge that,’ he said. ‘But no, $125.’”
He then went on to mention the internal fees within the mutual funds in which she was invested.
“‘How do I find those?’ And so began our journey into the bowels of the investment firm’s website.”
After 20 minutes of frustration and no answer, she gave up.
A financial advisor at the firm with whom she periodically meets was just as bad, quoting her two different charges due to confusion over what, exactly, she was invested in. After finally getting it straight, he said he would send her supporting documentation that’s approved for client use. She’s still waiting.
Until the supporting documentation issue, each person with whom she spoke, including a manager at her investment firm, seemed to respond in a timely manner and with a sense of urgency, they just could not provide the most basic information about her account. And the fact that she was a reporter for arguably the highest profile media outlet in the world might have had something to do with the callback time, if they knew her occupation.
Regardless, it’s consumer-oriented piece about retirement finances, so questions like these are only slated to increase. The industry, it would appear, is woefully unprepared.
Update: Some readers were upset after the initial posting of this piece, arguing their fees were reasonable, transparent and negotiable. We’d argue that if 2008 taught us anything, it was that financial services and Wall Street are synonymous, fairly or unfairly. Broad brush, guilt by association, call it what you will, but stories like these make us all look bad.