Posted on 02/24/2015 11:49:45 AM PST by Kaslin
Government’s involvement in healthcare has been such a rousing success, Obama is now thinking about getting more involved in regulating the retirement of Middle Class America. Hooray… Proposing new executive regulatory rules (because going through Congress is too cumbersome and democratic), the President has claimed that he is riding to the rescue of average American investors with the heavy hand of government oversight. According to theState.com:
The proposed rule, which Obama can put in place without congressional approval, would impose a requirement on some financial advisers to act as what the law calls “fiduciaries” for their clients, meaning that when they recommend or sell investments, they would be required to put the clients’ interests ahead of other factors, such as their own compensation or company profits.
Oh and by the way: If you like your financial advisor, you can keep your financial advisor.
So, let me get this straight: Obama wants to make sure that the financial well-being of investors is put before the profitability of investment firms, or the enrichment of financial brokers… In other words, he will codify that “clients are put first”? Who is going to define what is in the best interest of the client? Are we leaving that up to the same folks who think an 85 year old woman should be required to purchase health insurance that includes maternity care?
Obama will call on the Department of Labor to develop a rule that would require retirement advisers to abide by a “fiduciary” standard -- mandating that they put their clients’ interest ahead of making a profit.
Right. Because advisors always make money off of unsatisfied clients, right?
Currently, brokers and advisors are required only to provide their clients with “suitable” investment options. Of course, there’s a reason for that: It’s easy to explain why a 25 year old client can have substantially more risk in their portfolio than a 72 year old retiree… It’s not quite as easy to explain to regulators why a client took a loss in the last downturn, but the firm made a nice commission off of their decision. With government determining what advisors “should” or “should not” be suggesting, portfolio performance will soon be replaced with litigation avoidance (AKA: the most unimaginative, conservative, risk adverse, and low-yield investment options available).
Congratulations, Obama. You’re bringing Obamacare to the investment world.
More important than the impact of Obama’s misguided populist regulatory scheme, is the fact that his endeavor appears quintessentially quixotic. After all, it’s not private retirement accounts that are the problem. I don’t really see private 401k’s dipping into the red, or suddenly declaring insolvency… That seems to be happening to public sector retirement plans.
If you want to save the middle class from malinvestment, mismanagement, and over-promises, maybe we should address the insolvency of public sector employee pension accounts. Private retirements (while they surely suffer some losses during economic downturns) are positively the envy of public sector budgets, which are currently buckling under their projected (and unfunded) liabilities.
So while teachers, firefighters, and the entire public-sector workforce of Illinois watch their socialistic pension plan slip further toward bankruptcy, Obama is concerning himself with “solving” the problem of private sector employees being taken advantage of by “Wall Street sharks”. (Ya know: The same “Wall Street sharks” that donated to his campaign, and are protected by Elizabeth Warren’s major donors.)
I’m sorry, Mr. President: But I like my investment advisor, and I like my investment plan… Unlike my health insurance, I would like to keep both of them.
>>Who is going to define what is in the best interest of the client?
The first step in just taking our retirement funds away and putting them in the “lock box” and then doling it out “according to our needs” (as determined by the government, of course).
The War on the Middle Class is getting hot.
Now I can rest easy.
B@$+@rd!
B@$+@rd!
B@$+@rd!
B@$+@rd!
B@$+@rd!
Time to add this lie to my growing collection of Pinocchio Nose Awards.
A better answer would be for seniors who've accumulated some savings to learn something about finance and not depend on the good will of others. Another answer would be to restore interest on FDIC savings so seniors who responsibly prepared for retirement wouldn't be impoverished. JMHO
This is what the Kirchner regime did in Argentina seven years ago. Replaced private retirement assets with government IOU's and monthly "allowances" drawn on same. They took the assets, sold them, and put the money in the Government's pocket. (Graft, anyone?)
Obama's trying to hip-check his way in between retirees and their assets. If they aren't needy, make them needy. Then they'll have to turn into mendicant Democrat leeches to live.
>>If they aren’t needy, make them needy.
The mantra of the Progressives for 100 years.
Now don't forget -- right wingers want to privatize Social Security to line their own pockets!!! /s
There’s a good way of looking at this and a bad way.
The good way is pretty simple: I’ve noticed that quite a few company 401K investment programs are forced into high-load funds. That’s not very fiduciary—in fact, it’s a ripoff. The high fees are charged because the company just wants to get all of the legal bullshit off of their backs and hires a company to do that. Often, they will find high-fee fund families to pad their bottom line.
The bad way: well, it’s Obama. Anything can be redefined in the government’s favor. Private pension funds are a huge attraction for the government, because, as Willie Sutton said about banks, that’s where the money is.. or at least a good pile of it.
There’s nothing immediate in fiduciary language which would force a 401K into government securities, although some in the Obama camp would like to force that. It’s a kind of financial repression that other countries have used from time to time. The “justification” is that funds invested in bonds won’t drop as much during market downturns, but there’s virtually no protection in them against inflation, and little growth potential.
Retirement assets are being converted (as in, "theft by conversion") to public assets via the engine of inflation, which Greenspan/Bernanke/Yelled has running at full tilt while suppressing the normal metrics so people can't "see" it except at the grocery store. Meanwhile, investor/retiree returns are also being suppressed by Fed policy. It's called "repression", the idea of which is to "retire" TARP and the deficits by inflating them into nonexistence.
The Fed' s been doing that since World War II, but does anyone know about it?
I remember looking at Weisenberger Investment Results in the early 1980's and noticing that bond funds' payouts in yield had been fully funded by falls in the price of the underlying shares. So if a bond fund paid out 30% of the principal amount over four years, say, that was balanced by a 30% reduction in principal. The bondholders and fund investors had been eating their principal, and paying income taxes on top of that for the privilege.
Bond funds were a terrible deal during the Paul Volcker interest-rate runup in 1981-1984. They'd already suffered from inflation worries in 1977-81 (Jimmy Carter's administration..... And by the way, the inflation was deliberate; it was a called play by Jimmuh, who asked the Fed to print a whole pile of funny money to save the economies of Third World nations from the oil sheikhs), losing about 1/3 of their value. For several years, bonds stank. Bonds are not "safe" investments when governments pull crap like Obama has in mind.
Guaranteed Income Contracts and fixed annuities, even worse.
Yeah. But people have been so conditioned to think that they can't understand finance or economics for themselves that they fall for these schemes. And that includes a lot of people with pretty good intellectual skills and academic backgrounds.
There is an old saying where I used t work.
“Fool me once, shame on you!”
Fool me twice, shame on ME!”
I was with you until you painted with a broad brush.
Some seniors benefit from annuities, namely those who have no guaranteed income. In other words, provided they have sufficient cash reserves, as well as other investment income, an annuity is a great way to insure basic costs are covered every month.
Also, annuities don’t go through probate, some have death benefits attached, and with high-quality companies, fixed annuities have a guarantee never to lose principal.
Are their bad guys out there? Sure. However, there are more good than bad. Stick with reputable companies is the lesson.
If Obama outlaws finacial advisors, then only government could provide this advice and get paid the fees without fear of lawsuit or arbitration.
Bottom line, socialism is coming the the financial services marketplace - another trillion dollar government takeover.
Why is an annuity contract a bad thing? That is a very general statement that isn’t backed by either fact, or the market for the product.
Bonds have their place. If they are high quality bonds, the threat of default is very low, close to nil. The risk is that interest rates will rise and new bonds will offer higher returns. The other risk is inflation. High inflation means the interest payments are worth less, in current dollars.
Understanding the purpose of bonds in portfolio, and the risks, they may be just the thing.
However, blanket statement are ill-advised, as they often can’t be backed by empirical data.
We are being grubered.
I did. I get your point that for some people it's a priority to have a steady stream of income that covers expenses, and an annuity can do that. It could be a peace-of-mind-thing if they're losing a step in keeping up with finances.
I wonder how many people are put in that position because they planned for retirement with savings paying at least 4% interest on savings. And I wonder how many are doing the amount of careful scrutiny necessary to get the best possible deal.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.