"The math here is:
- There's about $1.7 trillion in individual retirement accounts invested in funds that pay brokers to recommend them.
- The people who invest in those funds could improve their performance by about 1 percentage point a year by switching to other funds that don't pay brokers." Matt Levine explains: "The way that a lot of retirement investing advice goes is that you go to your broker and ask him what you should invest in, and he says, "Oh Fund XYZ is great, put all your money in Fund XYZ," and the reason he does that is not that he loves Fund XYZ in his heart of hearts, but rather that Fund XYZ writes him a big check for steering you its way. I'm sorry, but that is the way it works. I mean maybe he also loves it in his heart of hearts, but that is not observable; the check is. As is Fund XYZ's subsequent underperformance versus its benchmark." If your financial adviser is NOT a fiduciary, then you are losing out. Not all financial professionals act entirely in your best interest. While investment advisors are required to follow a principle known as the fiduciary standard, brokers are only required to recommend "suitable" investments. Details on the fiduciary standard at: http://www.cnbc.com/id/102447585. Read more detail from Levine: http://www.bloombergview.com/articles/2015-02-23/white-house-is-not-fond-of-backdoor-retirement-payments