A new report from the Government Accountability Office warns employees to watch out for biased investment guidance from the financial companies paid to set up and run their 401(k) plans.
The Employee Retirement Income Security Act, or ERISA, says investment education is supposed to consist of general information, such as generic asset allocation models that are not tailored to a particular individual. But if an employee does get individual investment advice, it should be in that person's best interest and tailored to his or her particular needs. However, "in certain situations, participants face conflicts of interest from providers that have a financial interest when providing investment assistance," the GAO said.
"If left unchecked, conflicts of interest could lead plan sponsors or participants to select investment options with higher fees or mediocre performance, which, could amount to a significant reduction in retirement savings over a worker's career," the GAO report said.
http://www.washingtonpost.com/wp-dyn/content/article/2011/03/05/AR2011030503707.html
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