This is Motley Fool Answers. I'm Alison Southwick, and I'm joined as always by Robert Prokamp,

personal finance expert here at The Motley Fool. Hello, everyone. Today we're going to talk

about why your 401k options are lousy and what you can do about it. And Morgan Housel is back

to talk about what you should do when the market crashes, because

it's going to happen someday. Spoiler. We'll also answer your questions about annuities. All

this and more on this week's episode of Motley Fool answers.

Conflicts of interest abound in finance. So here's another one to ruin your day. According

to research by Boston College, one hidden reason why the options

in your 401 plan are lousy is because big mutual fund companies like Fidelity, Vanguard,

etc. often administer the plans and then stock them with their poor performing funds.

I don't know, bro. You're on our 401 committee. Can you explain this better than I did just

so everyone can feel an appropriate level of outrage? Sure. So everyone at your 401k, you have a trustee. In our

case, it's a bank, and the bank helps us choose the mutual funds within our 401K. However,

that trustee can also be a mutual fund company. And what this study found was that when

you have a mutual fund company as a trustee of your 401k, they're

more likely to choose their own funds. They don't have to, but they can. In fact, the study

found that they're more likely, twice as likely to kick out funds from another company and

more likely to include funds from their own company. Obviously, that makes them money.

The problem is a lot of the times these added funds have subpar returns. In fact, last year, Fidelity settled a class action

lawsuit from its own employees who sued Fidelity for including too many Fidelity funds

in the 401K and too many high-cost Fidelity Funds. So Fidelity Funds employees sued their employer for administering their 401K and doing a lousy job of it?

That's right, because...

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