From 1945 to 1974, the Western World -- including America -- was more socialistic than capitalistic, more pro-labor than pro-business. While that may sound surprising, when taken in context it makes perfect sense.

World War II had just been won and the Great Depression was still fresh in most Americans' minds. Having lived through these challenging times, Americans wanted a more benevolent, worker-friendly government. And they weren't alone. In England, Winston Churchill lost the 1945 election -- even though he was a war hero -- primarily because the English people wanted a pro-labor government, not a pro-capitalist government. Back in the U.S., President Franklin Delano Roosevelt's pro-worker policies were already in place, including the New Deal and Social Security.

This trend began to shift in 1974 with the passage of the Employee Retirement Income Security Act (ERISA). Under ERISA, companies were allowed to switch from defined benefit plans to defined contribution plans. Simply put, the primary responsibility -- as well as the expense and long-term consequences of retirement -- passed from the employer to the employee. As a result, pension plans gave way to self-managed plans like the 401(k) and Roth IRA.

Retirement Investor, Meet Wall Street

One might think that employers were the biggest beneficiaries of the changes ERISA put in motion over three decades ago, but I'd argue that biggest beneficiary was actually Wall Street.

Let me explain.

When I buy a piece of real estate, I may pay a 6 percent commission once. Even though I make money every month for years from my investment, I still only pay my real estate broker once. If I sell, I may or may not have to pay a commission. The choice is mine.

Yet when I invest in mutual funds (the vehicle of choice for most retirement plans), I very often pay a commission, or "management fee," every month -- even if I lose money.

Now I'm not against paying fees or commissions -- as long as I'm making money. But I do have a problem paying commissions or fees every month for bad advice. And most mutual fund advice has been bad, especially since March of 2000.

The Feeling Isn't Mutual

In his book "Unconventional Success," Yale University Chief Investment Officer David Swensen writes, "Sales charges from buying funds and tax burdens from churning funds combine to reduce already poor investor returns. Owners of actively managed mutual funds almost invariably lose." He goes on to say, "Other factors -- unethical kickbacks and indefensible distribution practices -- remain generally hidden from view."

Swensen also quotes a 20-year study which examined mutual fund returns over two decades ending in 1998. The study shows that over two decades mutual funds had miserable returns, an average shortfall of -2.1 percent when compared to the Vanguard 500 Index. And, the study ended in 1998 near the highs of the market!

In other words, most mutual fund managers cannot beat a mechanical method of investing, such as an index fund. But that doesn't stop them from regularly collecting "management fees."

In fact, says Swensen, the fees themselves are one reason many mutual fund managers don't manage to beat index funds. "A significant portion of the ... underperformance arises from the payment of management fees," he writes.

So if you're thinking about parking your retirement money in a mutual fund, be sure to ask about commissions and management fees. Or, even better, consider an index fund.