Donald Trump’s February 3 executive order enabling financial advisers to continue ripping off their clients could prove a lifeline for a surprising beneficiary: the private equity industry.
The Department of Labor’s fiduciary rule would have forced investment advisers in workplace retirement plans like 401(k)s to operate in their clients’ best interests, rather than recommending high-cost, high-risk products that offer the advisers kickbacks and perks.
The Obama White House estimated in a 2015 report that conflicts of interest cost retirement savers $17 billion annually, though that figure has been challenged.
The fiduciary rule, finalized last year, was to go into effect in April. But the new order directs the Labor Department to review the rule, which is expected to initiate the process of rescinding it.
As Gary Cohn, former Goldman Sachs president and director of the National Economic Council, put it, the fiduciary rule “is like putting only healthy food on the menu, because unhealthy food tastes good but you still shouldn’t eat it because you might die younger.”
Why Trump thinks individual workers must have the freedom to choose poison for their retirement funds is unclear. But one reason could be that his friends in private equity have long sought to add their particular form of junk food to that menu.
And to break into the 401(k) market — especially with financial products that are high-risk, high-cost, and often make their money from ripping established companies apart and selling the pieces — private equity funds would need a lot of help from the advisers who guide ordinary investors in the process. And that would require the ability to offer those advisers considerable perks and kickbacks.
On the same day that he issued his fiduciary rule executive order, Trump met with his White House jobs panel, headed by Steven Schwarzman, CEO of the world’s largest private equity firm, Blackstone.
“We’re getting rid of your regulations,” Trump told Schwarzman and his colleagues on Friday.
Late last month, Schwarzman stressed his craving for Blackstone to get into the 401(k) market. “In life you have to have a dream,” Schwarzman said on an analyst call, “and one of our dreams is our desire and the market’s need to have more access at retail to alternative asset products.”
Traditional pension funds invest heavily in private equity; this makes up about one-quarter of total private equity capital. But defined contribution plans like 401(k)s have traditionally not invested in the asset class. Because 401(k) holders choose how to invest their money and can move in and out of funds quickly, they don’t fit mechanically with private equity, which locks in investors over several years. Also, private equity usually asks for large minimum investments, not less than $5 million, to open their funds to investors.
But with pension plans now a rarity compared to defined contributions retirement plans, private equity wants to crack the 401(k) market to unlock trillions of dollars in potential capital. Americans hold $6.8 trillion in individual retirement plans like 401(k)s. The Wall Street Journal describes this as “something of a Holy Grail quest” for the industry.
Large firms like Carlyle, Blackstone, Partners Group, and Kohlberg Kravitz Roberts (KKR) have developed a series of 401(k)-friendly products over the past couple years. Most enable plan advisers to offer private equity stakes to investors as part of a “target fund,” in a diversified portfolio with other investments. “That’s where we believe private equity should go,” said Kevin Albert, global head of business development for Pantheon Ventures, on a Wall Street Journal podcast.
If plan advisers take this up, it would flood more money into private equity. “Five percent of the estimated $6.8 trillion and growing in 401(k)s is $340 billion — a nice chunk of change,” said Eileen Applebaum, senior economist at the Center for Economic and Policy Research and author of Private Equity at Work.
But these investments are far riskier than most 401(k) offerings. Contrary to popular belief, private equity firms do not outperform the market. Fees are also often opaque and much larger than those in passive funds, usually extracting 1 to 2 percent of the total capital invested and 20 percent of the profits. A 2014 SEC study found that over half of the private equity firms examined shifted costs to benefit themselves, like billing investors for legal and compliance costs without their knowledge, or forcing investors to pay for “consultants” who are actually former employees of the companies. Giant fees guarantee private equity profits regardless of the performance of their portfolio.
Last week, Pantheon introduced a new performance-based offering to plan advisers, with Pantheon only benefiting if they outperform the benchmark S&P 500. Albert claimed this would relieve the threat of class-action lawsuits over high fees. Pantheon will also partner with KKR and other firms to ensure they have sufficient funds to invest in companies, regardless of whether 401(k) investors pull their money out on a moment’s notice.
But private equity has been accused of deliberately reporting exaggerated returns to harvest fees. And even if the returns were legitimate, this would still throw millions of retirement dollars into an industry that has been sharply criticized for its predatory version of capitalism.
Private equity firms buy out companies and load them with unsustainable debt, forcing severe cost-cutting to maintain survival. Because private equity serves as manager and investor, they favor short-term gain over a company’s health, whether through using bankruptcy, favorable tax strategies, or monetizing assets. Workers often get left behind, with lower wages, lost jobs, or restructured union contracts.
The destruction of the Mervyn’s department store chain provides a salient example. Once a major retailer with 30,000 employees, Mervyn’s was bought out in 2004 by a consortium of private equity firms, who split off the company’s real estate assets and forced stores to pay exorbitant rent to service $800 million in debt. Within four years, Mervyn’s liquidated the entire operation in bankruptcy. The private equity managers, however, earned profits through the real estate deals and came out ahead.
Individual investors would therefore be using retirement dollars to fund an industry that terrorizes workers and sucks value from their employers.
How does sidelining the fiduciary rule facilitate this? Plan advisers would not be required to act in the best interest of their clients when promoting target funds, enabling them to include private equity, regardless of the fee structure or threat of losses.
“It could put retirement income at risk and may be more costly than the individual investor recognizes,” said Eileen Applebaum. “The financial adviser will know, but they’re now under no obligation to divulge.”
Advisers could also receive hidden kickbacks for including these investments in the target funds. There’s already a large cottage industry of perks for financial advisers, most of them obscure to individual 401(k) subscribers. Few would be able to outbid wealthy private equity firms for the privilege of peddling complex financial products to ordinary investors.
According to a study from researchers at Indiana University, the University of Texas and the Federal Reserve last October, plan advisers routinely present limited choices to 401(k) investors, to steer them into unnecessary or risky options. This favoritism benefits affiliated funds, and with private equity perks in the waiting, advisers would have yet another incentive to tout their products.
Top photo: Trump at a policy forum with business leaders chaired by Blackstone Group CEO Stephen Schwarzman on February 3
The whole point of this election was to allow the wealthy to loot the nation of what little they haven’t already stolen. Period.
It is lines like this that make me think you are the best journalistic writer around. “But one reason could be that his friends in private equity have long sought to add their particular form of junk food to that menu.” Love it!
Thought you might be interested.
The capitalist class won’t have to reveal information to workers about what they are doing with our retirement savings and calls it freedom do our own due diligence.
Fine, then let’s also abolish employment applications and peeing in a cup.
Let the 1% also enjoy the freedom to do thier own research when they buy our labor, let’s not tie thier hands behind thier backs or constrain thier freedom by requiring job applicants to reveal pertinent information either.
It is time for the amerikan people to go back to what their grandparents and great grandparents use to do. They didn’t trust the government or the banks, so they use to stuff their money into their mattresses for safe keeping! Dig a whole in the backyard at night and put their money into a used coffee can and bury it. Anything except letting those bastards get their hands on our money!
Why does the Federal Government need to be involved in this level of individual financial decision making? Is Big Brother supposed to beat up the kid who stole our Halloween candy?
If the obligation of Personal Responsibility is to remain an essential amendment to our collective make-up, then the consequences for those who do not practice it, especially with their own money and future, need remain. If there is no consequence to its lacking, gone is the incentive to cherish its importance.
Here’s a thought – study investment opportunities on your own and take any and all advice with extreme caution. If Bernie Madoff convinced me to buy stock in the Brooklyn Bridge, yes, shame on him, but of equal importance, shame on me.
Any investment firm or broker who doesn’t have their client’s best interests in mind, will not stay in business for long, as their interests are one in the same – to make money. If the client gets rich, so does the broker. If this is too broad of a generalization, and there are some exceptions to this rule, the solution is a simple, state-based one: If enough states have laws that emphasize clients’ interests first, the same result is accomplished as a Federal Law, without giving more power to Centralized Government, as there are less states in which the firm can consult, thus, forcing the firm to adhere.
By all means, Power to the People through Governors and State Legislatures. No need for the Federal Government to do what can easily be accomplished on a state level.
Why even pretend to imply that states are somehow better equipped to handle financial crimes when in fact you don’t support enforcement at all? All you’re proposing is a buyer-beware system. Let’s legalize embezzlement while we’re at it. Maybe get rid of the duty of loyalty for lawyers too? Buyer-beware, right? How about getting rid of the FDA? Here’s a thought – study food and drug quality on your own. Great idea! Hey lets increase transaction costs for everything!
Hold the phone. Could it be that Wallstreet thieves needing to rob Americans every which way but loose is threatened by President Trump’s new economic policies? IF you look at the models of transparency and cash flow, his models mimic those of Russia, eastern bloc and nazi Germany. The wallstreet model fakes a future value which allows wallstreet thieves to print money and take which very money is the productivity of Americans that will no longer be available for earning – it’s a robbery. Under Nazi Germany, Adolf took the banks away from the thieves and the people of Germany thrived in prosperity having recovered ownership of their productivity. Wallstreet opposes this.
Perhaps the foundation of prosperity that President Trump wishes to implement is too much like Adolf’s and the wallstreet thieves fear their game against Americans will be taken back.
(What is growth and who owns it? If you do not understand the concept of all this then you are driving blind.)
I want what you’re smoking . Hmu.
Corporate America has been using advertising to manipulate the public views on several subjects, fake/false news. The man in the Oval Office, knows ALL TO WELL, how to manipulate public opinion: ie. New York five, Obama citizenship, draining the swamp, working for middle class citizens and releasing TAX RETURN?
wallstreet new’ores still lyin’ as usual since WMD and before
http://thefederalist.com/2017/02/06/16-fake-news-stories-reporters-have-run-since-trump-won/
He doesn’t owe anyone his tax return. Gerald Ford started this circus by proffering them to the public in 1976 to try to get re-elected. It isn’t holy writ.
Need to ask Gary about this
I went to the page where this memoranda is and I am confused. It’s in response to something the Obama administration did in April of last year. It doesn’t call for it to be nullified but inspected. I see people in here saying and the article itself indicating it never actually went into effect. But the memoranda suggests that it did go into effect.
This site needs an editor IMO. Not for “voice” but just general journalistic maintenance.
Ed, It was entered in April 2016 but allowed a broad (almost universal) exemption for a year so RIA’s can figure out what the hell it means and adjust their business models accordingly. You can (if you take a while) deduce the meaning of the exemption here, last page…
http://webapps.dol.gov/FederalRegister/PdfDisplay.aspx?DocId=28806
Thanks, I also apologize to the writer of the article because he does mostly explain it in the first couple of paragraphs I just got confused again by the time I read the whole article and the comments section.
It seems strange though how much flack Trump is getting for nullifying things that never actually went into effect. Not that what he is doing is good it just seems odd in a way.
This ship sailed long ago. Back in my early thirties I remember when companies were buying up other companies and suddenly- BAM- pension plans were gone. Never mind people had paid into them and were relying on them for their retirement. Too bad, so sad the corporations were not going to honor those pension plans. At that time I wondered, “Why aren’t people completely upset and in the streets over this?” There was a strange well of silence. Where was the outrage?
That was easily 30 years ago and here we are today with the master puppeteers of finance and corporate power still pulling the strings. And the puppets keep dancing for them. The citizenry of this country has been lulled in to complacency, “fat, dumb, and happy,” with 24/7 entertainment to take the edge off of their malaise. Unbelievable.
Many of those people who lost their pensions now survive thanks to Social Security and money from a reverse mortgage. The increasing prevalence of reverse mortgages are going to be a rude awakening for the adult children of Baby Boomers who are expecting to inherit the house when their parents die.
…. and cheap drugs and cuts to treatment for drug abuse and mental health. All happened at the same time.
That said, don’t get lulled into complacency by Dems either. They will try to use Trump to push the exact same agenda we are now fighting against. Corporate, Neocon Dems are just as dangerous, don’t let them use Trump to push their agenda. Resist partisanship as well.
Private equity is not inherently evil and not every private equity deal results in bankruptcy and job loss. I was involved in the asset management world for over twenty years, and invested in many private funds, from early stage VC to late stage buyout and restructuring funds. The people are generally smart and work hard and are very well paid, and it is true they are indeed well paid. There are some terrible and greedy people in that world, but there are terrible greedy people in every industry and walk of life. And it is true that, on average, the funds have failed to deliver a premium over marketable securities, but the best managers have outperformed public stocks significantly, just like some individual stocks perform well above average. Many sophisticated pensions have benefited from their investments in private equity over long time periods, including some public pensions. If you are good at picking private managers, you can actually deliver well above average returns, just like good stock fund managers can deliver better than average returns by picking better stocks. That being said, I agree that private equity is not suitable for 401k plans and it is too complex and risky for the vast majority of investors. I also think the fiduciary standard should be required for all investment advisors as it is clearly a system fraught with conflicts; alignment of incentives between client and advisor is critical. I also note some of the comments on defined benefit plans being stolen – the truth is they are impossibly expensive to maintain and fund, as the benefits being paid to retirees can be immense. It is not like the plans just exist and the money is there, they have to be funded with cash and earn returns sufficient to pay benefits. Now that people live longer while retirement ages have stayed about the same, funding gets ever harder as opportunities to earn sufficient returns get harder to find (hence the influx of money to private equity and other alternatives). Many companies couldn’t afford these plans, its really just math at the end of the day. So save or invest where you can, and if you are young start saving sooner rather than later, its the only way to make the math work to have a source of retirement income. If you don’t like the traditional money managers, invest via one of the low cost quantitative platforms that allocate based on algorithms using ETFs and the like, they work pretty well.
Thank you Charles +1
Defined benefit plans are “impossibly expensive to maintain and fund, as the benefits being paid to retirees can be immense”? Sounds like Reagan-conservative propaganda. Most of these plans were, in fact, so well maintained and funded that they became the target of Milken, Kravis, et al., who stole these accounts at times when they were overfunded — and took it all for themselves and their ‘investors.’ It was this temporary overfunding — pursuant to diligent fiduciary actions based on not just investments but also actuarial principles — that would, in the long run, cover for those times when market returns and experience were disadvantageous.
Just as with excessive leverage and federal government borrowing, it’s about cash flow — not a momentary snapshot that can easily make a fund look bad if chosen opportunistically.
Bring back defined benefit plans — employ more actuaries, and have Wall Street assholes clean toilets and pick up trash for an honest living.
Could a condition to getting rid of the fiduciary rule be a universal, prominent notice required of financial advisers: “I’m in this to make money. I have no fiduciary obligation — the highest legal obligation possible — to you. This means that, should I so choose, I’m within my rights to steer you toward investment products that are high risk to you, but which benefit me in the form of fees and other rewards regardless.” The intrepid warriors of high finance should have no issue with this now much-in-vogue “straight talk”.
Here’s another article worth reading about Blackstone. If this is what they did to the housing market, one can only imagine the fun they’ll have with 401(k).
http://www.nakedcapitalism.com/2017/01/the-obama-administration-bails-out-private-equity-landlords-at-the-expense-of-the-middle-class-government-guarantees-for-rental-securitization.html
401(k)s and IRAs are useless anyway. Corporate America stole people’s defined benefit pensions and replaced them with this crap, and workers allowed it to happen because they’re so brainwashed to think that capitalism will work for them. Unless you make a lot of money you’ll never save enough with a 401(k) or IRA to retire. The defined benefit pensions paid people a fixed amount for life once they retired, and in addition to Social Security this was enough for most retirees to live on. I don’t have any friends who think they can ever retire now.
This of course assumes that you will actually receive your pension, and if you do receive it, you get all that you were due. The upshot to 401(k)s and IRAs is that the money you contribute is yours upfront (yes there are vesting periods for employer contributions). I don’t trust any employer to keep their word for 50 years. I’d rather be in control of my own retirement destiny.
Unless you have some evidence that employers are reneging on their obligations to pay pensions, this is nothing but paranoid baloney. I know people living off their pensions, and I’ve never heard of an employer failing to pay it. Your comment sounds like just more capitalist propaganda.
With regards to “capitalism not working for the workers,” where do you think the money from pension plans comes from? It’s not paid out of corporate earnings. Companies invest funds in the stock market and then use the income from those assets to pay pensions. Pension funds are some of the biggest players in the stock market. The difference between defined-benefit and defined-contribution plans is that the worker has to take responsibility for their own investments in the latter case.
great article, important stuff. 401k options through employers are a mess. advice for everyone, pick an index fund through your employer plan, then tranfser assets your private 401k plan as soon as your matching funds are vested, do this regularly. then invest in whatever you want to in your private 401k. these employer plans are ripping people off.
Donald Trump? That’s PRESIDENT TRUMP TO YOU, BITCH.
We must set the controls for the heart of the Sun.
Say it loud NOT MY PRESIDENT!
When will people (and partisans) understand that markets are structured. The policies written by and for elites have supported the distribution of income upward, for the last 4 decades
Needless to say, they have no use in rewriting those policy choices and rules — which means they also have no interest in even having them discussed
…let alone in the public light or honestly.
The first red flag is Shwarzman salivating. If this is ringing his bell, it has to be criminal. Amazing how Obama appeases him quietly on the way out the door to the tune of 1 bil and then Trump lavishes him 2 weeks later with this executive order. Rotten.
Donald Trump’s executive order will make your teeth all gray:
https://www.youtube.com/watch?v=tS_Xq7gSCBM
A test is just a test. But is a kiss just a kiss? Is a cigar always just a cigar?
Here’s a good article on what’s really going on with American retirement plans:
That’s Obama-Clinton policy in a nutshell. Given that they refuse to prosecute white-collar corporate crime (unless the victims are very wealthy, as with Madoff), all the fiduciary rule was for was PR in the pre-election season.
Here’s what investopedia has to say about the DOL fiduciary rule:
More to the point on the general response to Trump’s victory:
http://www.nakedcapitalism.com/2017/02/dont-side-neoliberalism-opposing-trump.html
P.S. How’s the article on Ebay tax avoidance schemes coming?
excellent link to naked capitalism it’s a 2 front war.
[President Trump] also is clashing with the most basic way Wall Street cannibalizes us. Without the free movement of capital, assisted by trade deals, financial elites and their corporate partners would not be able to slash labor costs, destroy unions and siphon off wealth into their own pockets.
TRUMP! TRUMP! TRUMP!
Welcome to…The Valley of Evil…exploited you all your working life and now…they’re gonna steal your ‘Golden Years’…and that equity you’ve locked up in your propert?…sorreee. ..another real estate meltdown…you can’t pay your property taxes? That really is unfortunate. ..we’ll have to seize it and liquidate any other tangible assets you may possess…Medical problems?
No insurance?…so sorreee. ..Burial Plan?…Afraid your kids are gonna have to pick up the tab. American Dream…what happened to it? Did it ever exist?
Did it ever exist?
In a nutshell, no! Work yourself silly, maybe retire with a modicum of guaranteed income, or not if raped by the financial wizards, and die.
As a teacher union leader I fought intensely at the introduction of non-pension schemes presented to our members. At the time our pension fund nor overall union leaders had the foresight or willingness to respond. This allowed for-profit entities to attach their motif to our members’ well earned retirement yet now diminished by fees and unvetted investment direction. Trying to speak a bit dispassionately about a process so inherently a rapier-rentier methodology.
Some gotta win, some gotta lose.
Good Time Charlie’s got the blues.
Love that old song. It’s not only a great tune, it perfectly explains why a law requiring a manager to work in their client’s best interest won’t get anywhere.
https://www.youtube.com/watch?v=-YP3pIPp8P8
I think a more neutral analogy than “Junk Food” would be Nuts. Some people will die horribly if they eat nuts, but for others they can be a healthy boost of protein.
When speaking about high risk high reward investment.
The business model of Wall Street is fraud, so why is anyone surprised that they want to spread their fraudulent activities into new areas? Nobody is going to be forced to put their 401(k) into private equity, so only greedy idiots will do that. It sucks that they’ll probably lose their retirement money, but that would be their choice. Too many people want something for nothing and WAY too many people forget that if it sounds too good to be true it probably is.
I would not be so sure about being forced to put one’s 401(k) into private equity if I were you. It depends on the company that sets up the 401(k) and the financial institution that manages the program for them. I know this because I was very lucky in my first two jobs to have Fidelity and Vanguard running the 401(k) plans where I worked, offering many investment choices, but in the job I held when I came out of retirement due to the financial crisis, the financial firm was a small time outfit owned by a friend of the company owner, and everything we were offered was junk.
I had a similar experience at the last company I worked for before retiring. Stable value funds(low risk) disappeared from the offerings and an employee had no choice but to put their 401k into higher risk funds. I would have done better had I cashed out early, even with the attached penalty.
what a horror you are.
shame on the people for believing they are being told the truth and are just greedy idiots for not knowing they are being lied to and after they lose all their money there is no place to turn.
stupid greedy people who think working all day raising 2-3 kids is an excuse for not attending a class some where…that explains how the wall street thieves plan the theft of their money.
of course you could provide that list for them right?
I work as an investment adviser and I must say, this article is not well informed whatsoever.
The fiduciary rule has caused some investment companies like Edward Jones to force their customers into higher cost IRA accounts. At no choice to the consumer or the provider. They also were not going to be able to add more money into their current IRA, meaning more paperwork, and more costs to the provider that would be passed onto the consumer.
The fiduciary rule meant well but it was a horrible implementation (as the gov’t usually does)
It was only going to hurt the people it meant to help.
P.S. I don’t support Trump or Obama for that matter, just a perspective from someone in the field who is actually seeing the effects of this
I’m a little confused by your statement regarding ‘customers not being able to add more money into their current IRA.’
You can contribute to a traditional IRA until age 70.5. There is no age limit on contributing to a Roth IRA.
It would be interesting to know exactly why Edward Jones “forced their customers into higher cost IRA accounts”. Speaking only for myself, if the institution holding my IRA accounts did something like that I would fire their asses on the spot, because there are plenty of companies out there that are not doing what you say Edward Jones is doing.
I also wonder how you can say that the fiduciary rule was a horrible implementation when it had not even come into effect yet. What is the basis for your statement?
As it was being rolled out it became very clear that the industry as a whole were going to shift EVERYONE into fee based accounts.. there would be no place to go after you fired your Ed Jones or Merrill advisor.. account minimums for advisory accounts were going through the roof leaving those with under 250,000 left on there own or with an annuity salesperson who’s industry held an exemption.. 250,000 would have quickly gone to a million btw
Well, I am confused! I always thought that a fiduciary duty was simply a legal construct demanding observance of a duty to act in the interests of those owed such a duty. -And that those breaching such a duty were liable.
The biggest 401k fund managers invest in some of the worst – but most profitable – corporations on the face of the planet. Their returns are based on job outsourcing, deregulation, environmental destruction, foreign arms sales, jacked up pharmaceutical prices, etc. Yes, we’re talking about Vanguard, State Street, FMR, Blackrock – no, not Blackstone, Blackrock.
https://qz.com/464273/index-funds-may-be-conspiring-against-the-very-same-investors-who-fund-them/
So you have a 401k and you get good returns; but all around you the society is crumbling as Wall Street impoverishes communities, stripping wealth at every point, leaving you with nothing but a bigger retirement check – so maybe you go move away from the slum into a little gated community with armed guards, if you can afford it, and so the Third Worldization of America continues.
This is called neoliberalism; it’s what Hillary Clinton and Barak Obama have supported throughout their careers. Trump is more like American Hustle 2.0, I suppose – straight up Robber Baron / Gilden Age mentality. But at least he’s honest about it, right?
That’s an interesting point about cross-ownership stretching anti-trust protection perhaps to the breaking point, I’ll need to give that full article a read later!
wont happen
the wonderful thing about having Donald Trump as president is
1. chaos in the gotta-be-perfect-and-politically-correct bureaucrazy
2. NO TPP which the dems fail fail and fail to admit as their losing cause
3. THE WALL and stopping immigration into the US
4. the wild things he wants to do that provide sufficient contrast to get the population riled up enuf to stop look and listen.
It’s so nice of the American workers to do what they can to help the billionaires survive. Poor billionaires :(
Interesting article.
Reminds me of a few past incidents where financial deregulation (undertaken with the best of intentions, of course) eventually – and some would argue inevitably – led to crisis, whether the S&L crisis of the 1980s/1990s or 2008’s “liquidity crisis”. As former regulator WK Black succinctly points out: “Control fraud can occur in waves created by poorly designed deregulation that creates a criminogenic environment” … and … “Regulatory and presidential leadership is important”… and … “Stock options increase looting by control frauds.”
As more than a few talking heads have pointed out, taxpayer-funded government bailouts (whether tied to S&Ls or any of the big lending institutions) have likely created an atmosphere of moral hazard, and have provided plenty of incentive to lenders and fund managers alike to engage in high risk ventures that eventually threaten the whole financial system.
Considering the lessons not learned (or outright ignored) in the wake of past financial meltdowns, it seems unlikely very little will change… particularly given recent politics.
BTW, if anyone is interested in a good read concerning these issues, check out Pete Brewton’s ‘The Mafia, CIA & George Bush’. Though it was published in 1992, it remains a primer on the scale of financial fraud in America.
I am glad someone besides me read that!
As For the bailouts, one can hope that the Tea Partiers and actual progressives will defeat any bailouts that were attempted. (And let’s not forget, the Bush bailouts had to get voted on twice when the House voted it down the first time.)
The prize is still the privatization of social security. Bubba Clinton got oh so close. Thanks Monica.
Bubba is a MUSLIM!!
Can you please provide a list of your trigger words to the moderators?
Please note in your email to them that this list is freely given by you, that you are under no outside duress and that the list is for the purpose of providing them with a self-censoring filter that is triggered after you type and submit any trigger-word, but before the comment appears in public.
Thanks.
Taking away any semblance of fairness to the consumer – this is Republican populism.
So here’s the truth: All this ruling does is create more paperwork.
I know, because my company was preparing for the DOL law. All it meant was the little guys (like my company) would have more forms to fill out. And its not like anything was going to happen to a big firm if they didn’t act in the client’s best interest.
Beyond that: While there are a lot of people in my industry that aren’t the greatest people, most of them do care. And there is a feeling out there that they shouldn’t be compensated in anyway, despite the fact that if not for them, most people wouldn’t even save for their retirement.
For instance, we’ve come in and taken over 401ks that use online based 401ks that invest in Vanguard funds. Guess what? They have almost no one doing it because no one pushes them to do so.
If you’re making 7% instead of 8%, that’s still better than 0% of nothing.
I don’t know who “your company” is but which ever it is, I’d rather have the CIA pull my fingernails out than entrust one cent to your company.
Why’s that?
I have helped numerous people who otherwise would have never saved a dime for retirement or would have socked away 50 dollars a paycheck for their whole lives retire comfortably. And we aren’t talking about people making six figures. I’m talking about middle and working class people with kids, mortgages, etc.
I always act in my client’s best interest, but I have to make a living. I never make promises about rate of return or anything like that. I always explain how I am paid. A lot of the time I’ll even tell them they can take the information I’ve given them and invest with Vanguard. Most people want to talk with someone about this stuff. Most people need someone to push them to invest a little more or explain to them how they can invest more.
Sorry you feel the way you do.
The whole equity market is a scam anyway. Ever wonder how these big investment banks consistently suck in tens of billions of dollars in profits every year? It would not be possible without a continuous influx of new money. That money comes from all the schmucks out here who are compelled to invest in the stock market. “Compelled” because the feds will tax us on any wealth we don’t dump it into a 401k & because the Federal Reserve deliberately keeps interest rates so low that there are no “safe” investments to be had. Ben Bernanke publicly stated that forcing people into the stock market was one of his main goals.
Backing off on this rule isn’t some catastrophe, it’s going back to “business as usual”.
fiduciary, schmiduciary….how can trump supporters care if they don’t even know what the word means
In order to keep the “punch bowl’ from emptying, new “opportunities” will have to be created to keep the party alive.
At this point in time, there is no fix for the economy – everything is now to-big-to-fail – so one way or another fuel has to be constantly added or the fire will just die.
Party like there is no-tomorrow!
It is really quite amusing to see the financial industry react so strongly to what ought to be common sense: putting the customer first. Back in the old days reputable businesses routinely did that, backing their sayings such as “The customer is always right” with action. And the initiative of the supposed populist Trump administration to further screw the little folks makes it all the more ironic.
That said, anybody who would pay a financial advisor or purchase products from predatory institutions like the ones mentioned has to be a fool. Study after study have demonstrated that the returns on high-fee funds are no better than those on low fee ones, and that the clients of financial advisors do no better than the general population. The stock market is a stochastic process, and anyone who tells you otherwise is full of crap.
Because its not about putting the customer first.
Its just regulation for regulations sake that won’t have any effect on big firms (they’d just find a way around it) while forcing the little guys to comply to more and more rules.
Having read your other post as well I realize you work for a small company, and like most people believe that somehow small firms are immune to the dishonesty that runs rampant among the large ones. Well, my experience has been quite the opposite, because two of my 401(k)s were handled by giants of the industry (Vanguard and Fidelity) with a high degree of transparency and responsibility, and the other by a small firm that offered high fee, low return crap. A fiduciary requirement was exactly what would have been needed to make them get their act together or go out of business. Thieves come in all shapes and sizes.
Vanguard and Fidelity are great for people like to do things themselves. I highly recommend them to anyone who feels capable of planning their own retirement.
But the sad thing is, most people don’t do this. Honestly, there are people that if we didn’t consistently check in on them would either A. Never start investing or B. Never invest more than some small percentage or dollar amount they first started socking away.
I agree that there are plenty of companies that do bad things. I run into people who have been duped all the time. Its unfortunate and frustrates me.
Agreed. That is why it was so unfortunate that defined benefit pension plans have essentially been done away with. Most people at the lower end of the salary scale barely make enough money to live on, and cannot afford to save at the rate necessary to achieve a viable retirement income.
And who do we have to thank for the disappearance of pensions? If there were any single culprit, it is the US Chamber of Commerce, which on behalf of its BUSINESS members has lobbied hard to remove any reference to corporate responsibility from corporate charters. They have traditionally had the ear of the republicans, who believe somehow that the well being of the workforce is only incidental to Americum Grateness, but also of the democrats with their equally insatiable desire for campaign funding and cushy jobs after retirement.
I see how people around 10 years from retirement will sweat over this.
As someone in their 30’s I can honestly say I knew by the age of 19, while working my first job, there was never going to be a pension for my generation. There will be no social security in my future. It will be gone or it will be a pittance so governments can still claim they care about their citizens. It was pretty amazing social security even happened in this country at all considering the US values individuals and businesses more than people and their communities. I don’t stress about it though. Who knows what’s going to happen in 50 years. May as well live in this moment and enjoy what I have in my life.
There’s no taking it with you, so you may as well enjoy life while you have it.
You sound like me in my early thirties. I had zero savings, a car payment and a mortgage. Then one day I pissed off one of our company’s major customers who demanded I be fired. My boss, one of the company owners, called me into his office and laughed as he told me what the customer had said, and advised me to stay away from that customer for a while. But I thought, “What would I have done if I’d been fired?” I decided to start saving, putting away as much as I could afford to, and do less consuming. Now, 40 years later I have a very comfortable nest egg, that I would hardly have to touch were it not for mandatory withdrawals. And a good thing, too: To make the Social Security funds last longer, the Government has been gaming the cost of living figures, which means that even now Social Security does not keep pace with inflation.
I urge anybody at any age to start saving as much as possible. Invest conservatively with the goal of meeting or just beating inflation. Save 25% of your take home pay if you can. If you start in your 20s and do that you will be a multimillionaire by the time you reach your late 60s. But the longer you wait, the worse things will be.
Oh I appreciate the concern and echo your sentiments. My wife and I save, and I am lucky to have parents who taught me those lessons early.
That and we’re not having kids which will save tons of money in the long run. I’m one of the few among my friends who just finished off paying my student debt too. I learned early on the system is not there for our welfare, it’s there for a couple people’s welfare.
The game is rigged, so you gotta learn how to play it or it will play you.
Agreed, we’re about the same age, but we also had a greater capacity to earn better wages. Now, when the gov’t. boasts the amount of new jobs created, they are most likely part time and whomever is the “president” could care less. I genuinely feel for the young people today as a whole and am glad that I won’t be around 10-15 years from now.
Well if it’s any consolation, none of us may be around in 10-15 years considering literally stupid children control the world’s largest nuclear weapons arsenal.
Sage advice indeed, but to really make a nest egg work for you, a 5% return on your money is necessary. Most financial institutions barely offer 1%. Heck, if I could get 3.5% right now being close to retirement, that would work for me.
True. To realize the greatest advantage of a long term savings program, you need to have compounding. But when you are tempted to invest in that so-called sure thing high yield investment, remember what Voltaire said: “The better is the enemy of the good.”
You might try PIMCO. Their funds routine earn more 5 percent a year.
https://www.pimco.com
A broker at a major bank (such as Wells Fargo) will be able to explain your options . . just a suggestion, I don’t work in the banking or financial industry.
Saving is a wast of time now. If you’re lucky enough to pay rent, buy food and scrape together enough for medical insurance premiums, that’s about as good as it gets for Americans in their 20s to 50s. The baby boomers were the last people to have employers that took care of their employees with benefits and decent wages/salaries. Although we know that’s not the case for everyone. I’m 38 and make 30k a year working full time, my mom is 67 and makes almost 80k a year with her retirement savings, social security, etc. That’s because she worked her ass off for the same employer for 25 years. But that employer provided medical insurance and made significant contributions to her retirement plan (and she invested wisely), in addition to the generous salary. She didn’t go to college but completed vocational training in computer programming that took about 6 or 12 months (can’t remember exactly). This was in the mid 1970s and she had 10 years of work before her long term job which was 1980 to 2005. But that is the real difference, those kinds of jobs are few and far between now and they’re not coming back. I’m not saving because I can’t even afford to break even without financial help from my mom. But I’m very thankful to be lucky enough to get that help, basically being at the right place and time for my family. I also knew from a young age that saving for retirement would be a massive waste. I remember paying close attention to the Enron affair when I was in my early 20s. And that’s only one example of working class plebs getting screwed for having faith in the system. I decided not to have kids and travel as much as possible because enjoying the present is more important than saving for a future that isn’t going to be there. My retirement plan is to work until I die or until I can’t physically/mentally perform my job duties. If the latter comes first, I’ll off myself. But at least I won’t have regrets about wasting my young life away working for companies that don’t give a shit about my future or well being. That’s my take on the economic situation for Americans. Everyone is different so if having kids and working 60 hours a week makes someone happy, that’s fine too.
I’m right there with you, Amber. We’ve been watching and paying attention to what the elders are doing. Their sales pitch is losing its effect. We are watching their actions, not listening to their words.
Enjoy the now because tomorrow has no promises. All the best to you and yours.
Save 25% of your take-home pay? Sounds like you’re totally out of touch with most people’s financial situations. Most people can’t afford to save 10% of their take-home pay. This is unrealistic capitalist crap. A much better idea would be for everyone to demand a return to defined benefit pensions or walk off their jobs until they get them.
Well, to do it you have to abandon the kind of lifestyle that the corporations and politicians advertize. For instance, they will tell you to buy the biggest house you can afford, and move up every time you get a chance. We built our house 27 years ago and worked and slaved to pay off our mortgage in 5 years. I have had precisely 2 cars since 1983. Our TV set has a 23 inch diagonal measurement. Credit cards are paid off every month, saving us thousands per year in interest payments relative to the general population. We almost never go out to eat in the US, and when we do, it is never fast food; mostly we eat at home using fresh ingredients (and almost no beef). True, we both have or had well paying jobs, because in college we majored in physics and EE instead of something easy, and true we have no kids. So instead of calling me a capitalist – which I decidedly am not – perhaps you should examine your own life choices.
By the way, I completely agree with your last sentence. People in this country have bought the corporate kool aide that what is good for business is good for them. The purposes of business are to create useful products and jobs, and then to create profits. As the law now stands, it is all about profits, and they lie even about that, because if you smoke their dope, you believe that the shareholders receive a fair share. Not on your life.
I didn’t call you a capitalist, I said that your comment sounds like capitalist propaganda. I apologize for the confusion.
I also agree about lifestyle choices. I also have no children, and I don’t have a car, though my wife has one. We also rarely eat out (lunch is at my desk, etc.), though I do buy only local organic produce, which is not cheap. We don’t generally shop or otherwise buy things except for food. But we simply don’t earn enough to save any significant amount of money, and I’m willing to bet that most people are in the same situation.
You said that you and your wife both earned good money; with small exceptions, most jobs are not paying well anymore; 95% of the new jobs created over the past 15 years are part-time or contractor jobs, for example.
I think that we pretty much agree on this. What angers me is when I read average people crowing about 401(k)s or IRAs and talking about how people should save for them to they can retire. It’s a big lie, these people will never be able to retire with these plans unless they’re willing to live in poverty.
It’s extremely difficult to save for retirement when almost half of the American work force is making less than $15 an hour. And these low paying service jobs are the only ones projected to grow in the next couple of decades. “American Exceptionalism” never existed but the fairy tale that some believed in is now dead. There’s no point in talking about making college affordable or free because the jobs aren’t there anyway. People need to stop buying into the lie that college will get you a return on your investment. Or that there are “better jobs” just around the corner if you put your head down and work hard. You don’t need a degree to make coffee or be a cashier at Target. We need innovation and investment in sustainable energy, infrastructure development and technology. Industries that could produce blue collar jobs with vocational training programs and white collar jobs that would justify a college degree. But instead we’ll end up with more people working shitty service jobs until there’s no middle class left.
http://fortune.com/2015/04/13/who-makes-15-per-hour/
Here is an article that looks at the sad state of retirement plans in America:
http://viableopposition.blogspot.ca/2016/05/retirement-insecurity-in-america.html
It’s increasingly looking like a cat food future for millions of American households.
Or human flesh from these avaricious bastards that prey off the general populace. The chickens will indeed be coming home to roost, and far sooner than these fools realize.