By Cole Lauterbach/Illinois Radio Network
SPRINGFIELD – Lack of knowledge about the fees Illinoisans pay to their retirement managers costs them hundreds of millions of dollars every year. A new federal rule may help to stop that, but experts warn the threat of lawsuits may take away options.
President Donald Trump allowed a Barack Obama rule to take effect this month that simply states that the adviser running a 401(k) or Roth IRA has to act in the client’s best interest. It sounds obvious, but Geoffrey Brown with the National Association of Professional Financial Advisors says small fees connected with products pushed by advisors can add up to more than half a million dollars over a career of stashing away a nest egg.
This costs Illinoisans big.
“Illinoisans lose upwards of $932 million a year because of conflicted advice,” Brown said. “They can recommend a mutual fund that pays a higher commission to the adviser versus a cheaper fund that would have been an equal or better alternative.”
Brown says the best policy is to be vigilant about the fees you’re being charged. If you’re not happy with the adviser, napfa.org is a great resource to find a new candidate, he said.
According to financial website NerdWallet, a millennial with the option of investing in one of two common funds can retire nearly $533,000 richer by choosing the one with fees that are less than one percent lower.
Some investment experts say the new rule puts legal pressure on advisers that would force them to not offer some accounts that may even have a higher return. Trump said he would continue to monitor the effects of the rule change after his financial officials couldn’t find a legal reason to block the rule.
