Fund industry gadfly, Ric Edelman doesn't think the SEC's proposed disclosure rule changes go far enough, so he wrote them a letter. Edelman contends that the summary prospectuses will be inefficient because the average investor will never read them. Also, he says that it is "insufficient to report fees and expenses as a percentage
of assets." Edelman's solution? Require fund companies to disclose fees in dollars and cents in monthly, quarterly and annual statements.
Company Press Release
Not good enough. So says Ric
Edelman about proposals to improve disclosure of fees in mutual funds and
401(k) plans.
Proposed rule changes were announced recently by both the Securities
and Exchange Commission and the U.S. Department of Labor.
The SEC said its proposal would require that mutual fund investors be
provided "a concise, plain English summary of key information about a
mutual fund's investment objectives, strategies, costs, and risks." The
Labor Department's proposal strives for enhanced disclosure for
participants in 401(k) plans of their plan provider's compensation and
potential conflicts of interest. Both agencies are currently accepting
public comments on their proposals.
But Edelman, nationally recognized financial advisor and bestselling
author who has written extensively on the subject of investment management
fees, said the proposed changes are insufficient.
In letters to the SEC and the Labor Department, Edelman said the
proposals -- while worthy of implementation -- do not go far enough. "It is
not sufficient to publish summary information in prospectuses or other
publications, because the average investor never reads these documents," he
wrote. "It is also insufficient to report fees and expenses as a percentage
of assets," said Edelman, noting that a large portion of investors are
unable to translate percentages into the specific charges they pay in their
own accounts.
Edelman urged the regulators to require fund operators to disclose
costs -- in dollars and cents -- on each investor's monthly, quarterly and
annual statements. "Funds already provide share balances and share prices,"
he wrote, "demonstrating that they are perfectly able to provide
account-specific information."
Regarding mutual funds, Edelman's said in his letter to the SEC that
the required fee disclosure should apply to all costs -- both those
currently found in a fund's prospectus as well as those listed separately
in its Statement of Additional Information.
The author of six books on investing and personal finance, Edelman's
current best seller, The Lies About Money, reveals that improper business
practices pervade the retail mutual fund industry and are resulting in
higher fees, lower returns, and increased risk for investors. A section of
the book titled "Hidden Fees" details how average investors are kept
unaware of the recurring mutual fund charges they are paying.
Edelman is founder and chairman of Edelman Financial, which manages
nearly $4 billion in assets for thousands of individuals and families
nationwide. Barron's in 2007 rated Edelman as the No. 2 independent
financial advisor in the nation.
Host of The Ric Edelman Show, broadcast nationwide via the ABC Radio
Networks, Edelman also writes a syndicated newspaper financial advice
column. He is a frequently called on by the media as a guest expert on
personal finance and investment issues, and is currently appearing as a
panelist on the CNBC series, The Millionaire Inside.
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