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Proposed Rules on Improved Fund Disclosures Insufficient, Says Edelman

For Immediate Release
February 11, 2008

Media Contact:
Mark Bagley
mbagley@RicEdelman.com
703-227-0541

FAIRFAX, Va., Feb. 11, 2008 — Not good enough.  So says Ric Edelman about proposals to improve disclosure of fees in mutual funds and 401(k) plans.

Proposed rule changes were announced recently by both the Securities and Exchange Commission and the U.S. Department of Labor. The SEC said its proposal would require that mutual fund investors be provided “a concise, plain English summary of key information about a mutual fund’s investment objectives, strategies, costs, and risks.”  The Labor Department’s proposal strives for enhanced disclosure for participants in 401(k) plans of their plan provider’s compensation and potential conflicts of interest.  Both agencies are currently accepting public comments on their proposals.

But Edelman, nationally recognized financial advisor and bestselling author who has written extensively on the subject of investment management fees, said the proposed changes are insufficient.

In letters to the SEC and the Labor Department, Edelman said the proposals — while worthy of implementation — do not go far enough.  “It is not sufficient to publish summary information in prospectuses or other publications, because the average investor never reads these documents,” he wrote.  “It is also insufficient to report fees and expenses as a percentage of assets,” said Edelman, noting that a large portion of investors are unable to translate percentages into the specific charges they pay in their own accounts.

Edelman urged the regulators to require fund operators to disclose costs — in dollars and cents — on each investor’s monthly, quarterly and annual statements.  “Funds already provide share balances and share prices,” he wrote, “demonstrating that they are perfectly able to provide account-specific information.”

Regarding mutual funds, Edelman’s said in his letter to the SEC that the required fee disclosure should apply to all costs — both those currently found in a fund’s prospectus as well as those listed separately in its Statement of Additional Information.

The author of six books on investing and personal finance, Edelman’s current best seller, The Lies About Money, reveals that improper business practices pervade the retail mutual fund industry and are resulting in higher fees, lower returns, and increased risk for investors. A section of the book titled “Hidden Fees” details how average investors are kept unaware of the recurring mutual fund charges they are paying.

Edelman is founder and chairman of Edelman Financial, which manages nearly $4 billion in assets for thousands of individuals and families nationwide. Barron’s in 2007 rated Edelman as the No. 2 independent financial advisor in the nation. Host of The Ric Edelman Show, broadcast nationwide via the ABC Radio Networks, Edelman also writes a syndicated newspaper financial advice column. He is a frequently called on by the media as a guest expert on personal finance and investment issues, and is currently appearing as a panelist on the CNBC series, The Millionaire Inside.

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Editors:

The full text of Edelman’s letter to the SEC is available on the SEC Web site at:
http://www.sec.gov/comments/s7-28-07/s72807-23.pdf

The proposed SEC rule changes as published in the Federal Register are posted at:
http://www.sec.gov/rules/proposed/2007/33-8861fr.pdf

The Department’s of Labor’s proposed rule change is posted at:
http://www.regulations.gov/ fdmspublic/component/main?main=DocumentDetail&o=09000064803795f7

Edelman Financial is a marketing name for two affiliated registered investment advisers. Edelman Financial Services LLC primarily serves the Washington D.C. area; Edelman Financial Advisors LLC serves clients nationwide via its own advisors and unaffiliated registered investment advisers. Sanders Morris Harris Group (Ticker: SMHG) is majority owner of EFS. Ric Edelman is majority owner of EFA and minority owner of EFS.

Ric Edelman is an Investment Advisor Representative and offers advisory services through Edelman Financial Advisors LLC and Edelman Financial Services LLC, SEC registered investment advisers. Ric is also a Registered Representative of and offers securities for Edelman Financial Services LLC through SMH Capital Inc., an independent broker/dealer, member FINRA/SIPC.

Barron’s cover story “Top 100 Independent Financial Advisers,” August 27, 2007 (compiled by independent financial industry researcher R.J. Shook, based on assets under management, advisor’s contributions to the firm’s revenues and profits, quality of service, and client satisfaction).