The case for reforming mutual funds has become stronger as a a result of the $1.33 trillion decline in the net worth of Americans as reported in the first quarter 2009.
This decline stems from portfolio and housing losses which are the main sources of retirement income for many middle class Americans. This connection is more fully presented in this white paper "How Housing Wealth Affects Retirement Planning.. (A main source of retirement wealth for poorer Americans remains Social Security.)
While the mutual fund industry has no control over the macro-economic environment, it can reduce costs, in the form of lower 12b-1 fees, conflicts of interests in the form of revenue sharing agreements, and be more open about the diversification capabilities of some of its more popular products, such as target-date funds.
The industry should also adopt more open disclosures about revenue sharing agreements and whether they constitute a conflict of interest with their shareholders.
Thursday, June 11, 2009
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