The SEC’s investor advocate is prioritizing fee disclosure in the $16 trillion mutual fund market, according to a report.
An article on BenefitsPro explains:
In his most recent report, [investor advocate Rick] Fleming cited an April 2016 report from Morningstar that said the overall fees on mutual funds and exchange-traded funds continues to trend downward.
But despite that trend — the average expense ratio was 61 basis points in 2015, down from 73 basis points five years ago — retirement savers may not be realizing those savings.
That’s because many of those cheaper mutual funds and exchange-traded funds are acquired through retirement platforms and investment advisors that charge a fee for managing assets, said Fleming in his report, citing Morningstar’s data.
The overall trend of lower investment fees is being driven by investor demand for cheaper, passively managed investments, such as index funds, and the “strong inflows” of retirement savings to cheaper institutional share classes of funds available to 401(k) participants, according to Fleming’s report.
As fund fees become an “increasingly important cost component”, many investors are still not getting the benefits of what they are paying for. “[I]t would seem that even as fund fees continue to trend downward, investors are not necessarily receiving the full benefit of lower fund expenses,” Fleming said.
