hoppy08520 wrote:M1garand30064 wrote:BruceM wrote:Some industry rebuttals....
http://www.plansponsor.com/Documentary_ ... _Fees.aspx
That's a very weak rebuttal IMO. They dismiss the claim that fees are the most important category for choosing funds and say that they are offering a very important service or value, but never state what that value is or what other categories are more important than what you are paying to maintain the investment.
Yes, a pretty sorry rebuttal. I can summarize their point about the 2% fee not being an accurate portrayal: "We're bad, but not that bad. Maybe only 1.5% or so bad. But 2% ?! No, it's only 1.5%."
The rebuttal had an undercurrent of people in the industry feeling aggrieved and hurt that we aren't all so appreciative and grateful to them for the privilege of letting us serve as hosts to their parasites.
I don't think my language is incendiary. I have a significant amount of my savings held captive in a 401(k) plan where I have to pay these parasites for some value (what value?) that I don't want or need. If I could have that same money at Vanguard or the Thrifts Savings Plan I'd be saving a lot of money as the expenses in the 401(k) plan are at least 10 times what I could get independently at Vanguard, and more like 20 times what I pay for my TSP.
2% is an entirely accurate portrayal of a lot of plans. My wife's plan, for example, is administered by Standard Insurance. She has the typical menu of actively managed funds from companies like American Funds, Janus, T Rowe Price, Wells Fargo, etc. Standard Insurance adds its own 1.3% management fee on top of the management fees charged by the individual funds. It appears that the value we receive for this 1.3% management fee is the ability to look at our account balances through their horrid web interface which is far clunkier than any major fund web site. So, to pick one random but mainstream example from my wife's offerings... American Funds Balanced (RLBCX) I have to go to Morningstar to discover the fund itself has an expense ratio of 0.95% which means my wife is charged 2.25% to invest in this fund. If she wants to invest in international stocks she has the choice of Thornburg International Value (TGVRX) which has a fund expense ratio of 1.6% making my wife's total fee a whopping 2.9% if she wants any international exposure. Bonds, you want bonds? The choice she is offered is PIMCO Total Return with a fund expense ratio of 1.1% making her total fee 2.4% if she wants any bonds.
So while it may be technically true that not many mutual funds charge 2% fees, when those funds are made available through 401(k) plans, the TOTAL fees often exceed 2% and may actually be closer to 3%.