In other industries, higher-priced products are typically superior in both quality and efficacy—think luxury watches and cars, or the difference between a roadside motel and the Ritz-Carlton. With financial services products, however, it works in exactly the opposite way. Virtually every single piece of academic research ever produced on the topic says that the less you pay for an investment product, and the simpler it is, the better off you’ll be over the long-term.
Wall Street knows this for a fact. It’s undeniable that high fees and excessive trading costs damage the long-term potential of a retirement account and work against investors. Unfortunately, the brokerage business is predicated on selling the higher cost solutions because that’s where the profit margins are. The incentives paid by fund companies to brokerage firm sales forces across the country are a cancer that must be rooted out. This built-in conflict between advisor and client is partially responsible for the nation’s looming retirement crisis.
It also plays a role in the finance industry’s almost universally negative perception among Americans. READ MORE
Wall Street knows this for a fact. It’s undeniable that high fees and excessive trading costs damage the long-term potential of a retirement account and work against investors. Unfortunately, the brokerage business is predicated on selling the higher cost solutions because that’s where the profit margins are. The incentives paid by fund companies to brokerage firm sales forces across the country are a cancer that must be rooted out. This built-in conflict between advisor and client is partially responsible for the nation’s looming retirement crisis.
It also plays a role in the finance industry’s almost universally negative perception among Americans. READ MORE
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