Yes, you pay a fee to have your funds managed. No, that does not mean "you work for Wall Street", whatever the heck that's supposed to mean.
This is like dropping into the middle of a demented rant. There's no disagreement on the facts here, but there's a lot of smoke and heat, and not much fire.
If you don't like paying to have your funds managed, you have plenty of other options. Use one. I'm not sure this constitutes the end of civilization as we know it.
This article does mention Bogle, but really just reading something by Bogle directly would be better than this piece.
IMHO, the situation cannot improve unless the "unsophisticated investors" are educated to have at least some semblance of investment savvy. You don't need any quant stuff at all. Even just some basic understanding of why a balanced portfolio makes sense, the power of compound returns, the impact of fees, the effect of taxes on your returns, the tax exposure nature of various securities, and a sense for what "financial products/funds" even exist in the financial universe would do.
Unless you work at a large company. At one, I had access to the vanguard institutional funds, which were even cheaper than the admiral
The keywords are "offered by most 401k plans". Within the universe of funds out there, it was utterly shocking to me how bad the funds offered in your typical 401k plan were. I honestly think they just stick random kids 3 years out of college to run them.
The solution is for employees to become better educated and demand better plans. This Frontline program does a pretty good job of getting the message out.
"Business" in general seems to be bimodal in making money from (a) providing value to sophisticated players, or (b) gouging the unsophisticated players (long tailing it) with a shitty product.
This is much of the consumer products/services industry these days. See, e.g., Applebee's.
Besides, how did they get 2/3 anyways? If I make 7% and 2% goes to someone else, I'm still left with 5%. 5% > 2%. So how does that 2% translate into 66.7%?
http://www.math.com/students/calculators/source/compound.htm
For example, if you invest $100 for 50 years at 7%, at the end of the 50 years you have $3278.04.
If you invest into a fund that nominally returns 7%, but charges a 2% fee, your net increase is 5%. If you invest $100 for 50 years at 7%, at the end of the 50 years you have $1211.93.
1211.94/3278.04 = 36.97%
Not quite 1/3rd, but close enough for government work. So for the average person who blindly shotguns their 401K selections without considering expense ratios, there are many fund managers living in the Hamptons.