I’ve written in the past about 401k fees and how they can cripple your retirement savings. For as many problems as those 401k fees can cause they often pale in comparison to the fees retirees will pay after they rollover and transfer their funds to an IRA. A Bloomberg article from June 17, 2014 discusses the abuse inflicted upon retirees through investments in illiquid, unsuitable and high-commission investments that create big payouts for brokers but leave retirees at a loss.
The Bloomberg article tells its tale about a broker who targeted retirees of Dallas based AT&T who enjoy both a 401k and pension plan. The brokerage agent at the focus of the story was paid hundreds of thousands of dollars annually (along with her business partner) but claims she had no idea how much commission was paid on the investments she recommended. So, in her mind, the fault is not hers that she put a lot of retirees in a position to fail. At best she lacked a basic understanding of the investments she sold. At worst she intentionally fleeced her clients and knew it. Neither is a good story.
401k and pension rollover abuse
But this isn’t just a problem with one suspicious brokerage agent; this is a widespread problem. A $300 billion rollover boom is happening and there are many, many mouths trying to feed on those rollovers. Not all of those advisers and brokers are corrupt but they sure aren’t doing the work for free, either. Somewhere in the midst of all that rolling over is a paycheck for them. There’s nothing wrong with paying somebody for professional services. There is a problem when the professional service is dishonest and self-serving. The financial services industry is a great opportunity for dishonesty. Few people really understand what goes on. People assume those entrusted with their money have their best interests at heart.
If you are retiring from employment you need to carefully consider your options and take time to understand investment basics. That way you can at least assess the sales pitches to make sure you entrust your money appropriately.
Employee benefits attorney for 401k and pension rollover abuse
If you believe a broker, adviser, or other financial professional conned you into rolling over a 401k or pension into bad investments then you should speak with an employee benefits attorney right away. Attorneys familiar with 401ks and pensions can assess your situation and advise you whether you have remedies against the financial professional or your plan. Sometimes plan sponsors (like your employer or union) guide retirees to financial advisers who have a relationship with the employer and provide kickbacks for rollovers. If this happens the plan may be liable for acting in its own interests which is a violation of ERISA. Find an attorney today to advise you of your rights.