This implies that we need full price transparency in the financial industry. A simple way to accomplish this would be a law stating that all investors must receive a yearly invoice telling them how many dollars they paid in fees that year, including fund expenses, advisor fees and everything else. Mandatory dollar invoicing would take a hideously complex problem and turn it into a simple one. It would make the financial industry function more like the idealized free market that Hayek and other economists have dreamed of. There’s a good chance it would help investors get more for their money. And it could also help ease concerns that finance is taking up too much of the U.S. economy.
Noah Smith is a Bloomberg View columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.
This column was provided by Bloomberg News.