An Investor's Ultimate Slap In The Face

The Investor's Slap In Face 

by: Brendan Magee

There isn't anyone who likes it when their time and money are disrespected. Doctors and investment companies seem to give new meaning to the phrase "We don't mind, cause you don't matter."
Here's two examples of that.

After having received notice that it was time to have my eyes checked, I go to the optometrist. I am there and they know that I am there for my annual check up which I have taken the time to make sure would be covered by my health insurance. The receptionist also informs me that every so often it is a good idea to have your peripheral vision checked by a test that is not covered by my insurance and for $20 I agree to have that test done and am expecting to pay a total of $45 at the end of my visit.

After my visit the receptionist informs me the bill would be $135 because I had a contact lens evaluation which I had no notice would be done. Again, their notice to me was for an eye exam. Worst of all, I have several months of contacts at home so I am not even thinking about replacing my lenses. Yes, the evaluation was done, but I never asked for it, nor was informed prior to my visit that it would be done. I ask why I wasn't informed that the contact lens evaluation would take place in addition to the eye exam and the receptionist just looks at me with a blank face.

 I realize I am going to get no where with any protestation and, quite pissed off, pay the bill questioning whether I will ever set foot in an office I have been going to for 15 years. I can't believe they feel justified in having me pay a bill for services that I never would have agreed to pay at that time. I was not given the right to make an informed decision. Thinking about it now I am getting angry all over again.

This same scenario is happening to many investors. In particular to sponsors and participants in 401k plans. The other day I sit down to discuss a company's 401k plan and the sponsor believes his company is getting a pretty good deal on the costs of the plan. The problem is, though, we can't account for all the costs the plan is paying. They are buried within the investment contract itself. They can't be accounted for.

I go to Morningstar, a data collection company for the universe of investment products. I find a listing of all the costs associated with this contract. The list details over 20 expense items but doesn't list include the costs associated with those expenses. I call Morningstar and ask the representative where or how I could find that information. He informs me that if the investment company doesn't release the information they cannot publish it. (Are you smelling a rat too?) So how much is this gentleman and his participants paying for just the investment portion of their 401k plan? Your guess is as good as mine at this point.

Two big problems here: The plan sponsor is responsible for being able to account for all plan expenses or he can be found to be in breach of his fiduciary responsibilities to the plan. That is a personal liability. The participants are absorbing the costs of the plan. Their retirement is being directly impacted by these costs. They have no way of knowing what those costs are and whether or not they are receiving value in return for what they are paying. The plan and its participants are in the dark. They are at a terrible disadvantage and the investment company seems to prefer it that way.

At least with me and my optometrist I found out what I paid. I am smarter for the experience and will not make that mistake again. I will ask more questions the next time and will walk out of the office (If  I go back at all!) if my time and money are disrespected. The 401k plan sponsor, nor participants, are given the opportunity ( To feel the sting of getting burnt!) to learn from their mistakes. Neither their time or money is given the respect that it deserves.

Lesson here:  If you can't account for it, the damage being done is almost always way more than you think and way more than the investment company wants you to know about. No one cares more about your money than you. Do not assume because you can't see it that the investment company has put your agenda ahead of theirs. Trust is good, but trust with the ability to verify is way better.

Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions or comments e-mail brendan@coachgee.com or call 610-446-4322.