Information is power. If you doubt that when it comes to retirement, just consider how much having information has changed your life for the better, thanks to the Internet.
Say you need to buy a new car. The dealer obviously has a lot of unspoken incentives. He’s likely to give you a break on one aspect of the deal knowing he can make money on another.
So, you check a few car pricing websites, call up a no-haggle car-buying service from the auto club and, presto, no hidden side deals.
Maybe you need a plane ticket. Used to be, you had to call up a travel agent and let them pore over hundreds of flight options. It was fairly easy for the airlines to show the agent seats priced however they wanted.
Enter the Internet. Now you can check prices weeks ahead of your travel date and find a good deal. Same with hotels and rental cars. Transparency rules.
Information really is power. In Washington, meanwhile, the struggle continues to bring that kind of power to retirement investing. Congress has been holding hearings for several days on the issue.
On one side is Wall Street and the big national financial advisory firms. They clearly don’t want information to get out. They want retirement savers to rely on assurances that the investments stock brokers recommend are their best choices.
Making that promise the law, rather than simply an assurance, sounds simple. But here’s the president of financial advisor trade group SIFMA Ken Bentsen arguing against it, in an interview.
“It’s too complex. It would create higher costs, tremendous disruption in the marketplace, less access to financial advice for people who need it,” Bentsen said. “You’d have to fire some of your clients.”
That’s one way to look at it. Another way is that a fiduciary standard is not complex at all. What are complex are the tortured arguments that stock brokers make to avoid giving clients the information they need to make good decisions.
Like how stock brokers get paid in secret to recommend one fund over another. How certain products carry stiff upfront fees, called loads, that decimate your account balance.
How ongoing annual advisory fees of 2% and higher — practically the industry norm — are incredibly out of touch with the reality of trying to save and build a retirement that works.
“They’re passionately committed to the best interests of their clients, as long as they’re not legally required to serve the best interests of their clients,” said Barbara Roper, director of investor protection for the Consumer Federation of America.
Information is power. Knowing what you pay and why matters. And waiting for Wall Street to do the right thing is unrealistic, judging by their statements to Congress in testimony.
Retirement savers need financial advisors who talk straight and show their cards, simple as that. Anything less is a step backward.