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Read of the Day: How the Mutual Fund Industry Eats Your Lunch

I’m not the first to predict the death of the mutual fund industry.  But it’s coming….Here’s why:

The mutual fund industry dines off your ignorance. It has created a structure where the fees charged to run mutual funds include a very large chunk that is directed by fund companies to advisers who sell funds and their firms. All fund fees are scooped off the top of fund returns, and the net amount is what appears in fund company literature and on third-party data websites likeGlobeinvestor.com.

The fund industry turned advisers into their sales arm, and rewarded them with a compensation system that kept inattentive investors from ever encountering fees. But advisers sold their souls in this transaction. In allowing people to think there’s no cost to advice, they made it possible to also think there’s no value to it.

Read more here.

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