I often wonder why millions of boomers have not figured this out. They spend 30 or 40 years saving trillions of dollars of pension assets in their retirement accounts. Then they turn the assets over to Wall Street professionals who are supposed to increase their pension amounts with sage advice and sophisticated investment services.
The role of pension assets is to produce income during retirements that may last 30 or more years. That’s right, a lot of boomers will spend as many years in retirement as they did working. That’s the good news. The bad news is rising longevity means investors will have to generate higher investment performance to offset the erosive impact of expenses and inflation for a lot longer than they may have thought. Or, they may face their biggest nightmare, inadequate assets late in life when they need it the most. Continue reading →
The greatest thing about defined-benefit plans was that workers didn’t have to do anything other than show up for work to get the desired result: a guaranteed income for life. It was a good system in that most workers didn’t want responsibility or control, just a secure retirement.
The defined-benefit plan is gone, and it’s not coming back. It’s been replaced by the 401(k), an accidental solution to the retirement problem. As a replacement, it’s been a dismal failure. The worker is still just looking for a secure retirement with little to no input required. Unfortunately, very few workers are on track to get that these days. Continue reading →
The employer’s obligation for the pension plan doesn’t end when they write the check. It begins.
Without any thought or planning the 401(k) has become America’s pension plan. The days of guaranteed retirement income for life are long gone, and along with them the financial security that the traditional pensions plan provided.
The 401(k) solution is deeply flawed. The widespread failure of 401(k) plans to provide adequate retirement income security for American workers has caught the attention of the courts, regulators, the administration, Congress, academics and participants. Continue reading →
Two years ago the most important concern investors had about financial advisors was their ethics. Could investors trust advisors to provide complete and accurate information that was free of any potential conflicts of interest? Major losses in 2008 and continuous headlines documenting scams and deceptive sales practices fueled their concerns.
Now, the biggest concern is the advisors’ ability to produce competitive performance for reasonable amounts of risk and expense. This new #1 concern is also not surprising. Four years after the 2008 stock market crash, investors are still trying to win back their losses. And, performance is their principal way of getting their assets back. Continue reading →
Americans spend their working years accumulating retirement assets that they turn over to Wall Street for investment. They need asset growth so they can retire when they want to and live comfortably and securely during their golden years.
Americans are in big trouble and they don’t seem to know it or they don’t care.
They have put their trust in a Wall Street system that has proven it cannot be trusted to put investor interests first.
Investors want competent, ethical advice they can trust. Wall Street wants investor assets to maximize company profits, share values, and executive bonuses.
There is only one winner for these conflicting goals.
Investors don’t stand a chance unless they develop a powerful voice that cannot be ignored in Washington and on Wall Street. Investors are voters. They can create change if they care enough. Maybe the damage to their retirement hopes and dreams will be the catalyst.
The Department of Labor recently withdrew a new rule that would have allowed financial advisors, who acknowledge they are fiduciaries and work for fees, to give advice to 401k participants.
As Jason Roberts, an attorney at Reish and Reicher, said, “It seems like someone in Congress gave the DOL an order to stand down.” In my opinion, Wall Street lobbyists lined the pockets of key politicians on the right committees to get the rule withdrawn. Billions of dollars of fees and commissions were at stake if Wall Street’s legions of commission sales reps did not have had access to the trillions of dollars that are owned by 401k participants.
Wall Street sales reps already have access to plan trustees who are supposed to be smarter than plan participants. But, the trustees’ lack of knowledge makes them easy targets for sales reps from broker/dealers and insurance companies. The fiduciary advisor rule created a major risk for Wall Street because the advisors would be in a position to influence the investment decisions of plan participants and critique the decisions of the trustees. Billions of dollars of fees and commissions were at stake. There is no question plan participants need help allocating assets, managing risk, selecting funds, and making strategic changes over time. They do not have the knowledge to do this work themselves. How important is this rule? It will determine the standard of living for millions of participants during retirement and their financial security late in life.
So what is the solution? Computer programs? Cookie cutter solutions based on participant ages? The solution is the fiduciary advisor who is compensated to advise participants with large and small account balances.