Republicans block stricter rules on retirement savings

[Crabtownboy]

Who says Republicans have the people's best interest at heart?

From: https://www.washingtonpost.com/busi...b30806-21d1-11e6-b944-52f7b1793dae_story.html

Republicans controlling the Senate passed legislation Tuesday to block new Obama administration rules that require financial professionals to put their client’s best interest first when giving advice on retirement investments like individual retirement accounts.

The Senate passed the legislation to roll back the rules by a mostly party-line 56-41 vote. The regulations are aimed at blocking financial advisers from steering clients toward investments with higher commissions and fees that can eat away at retirement savings.

The new regulations, commonly known as the “fiduciary rule,” require advisers who charge commissions to sign a promise that they will act in the client’s best interests, earn “reasonable” compensation and disclose information about fees and conflicts of interest. It will take effect next April.

“It’s pretty simple. It says if you’re giving people advice on their retirement accounts, you should put the clients’ best interests ahead of your own,” said Sen. Patty Murray, D-Wash. “We’re here today because Republicans want to block that new rule from helping families. That’s just wrong.”

 

[annsni]

What is their reasoning for blocking it?

 

[annsni]

Oh now I see:

"
Republicans say the rules would establish a new fee structure that might not be worth the broker’s trouble, and consumers won’t be able to get the advice they want. Instead, opponents say, retirees may have to seek higher-priced advice or fend for themselves. They point to the experience of Great Britain, which has imposed a similar rule.


“The result was that people with smaller savings accounts lost access to retirement advice,” said Sen. Lamar Alexander, R-Tenn. “Many firms quit providing face-to-face advice for small accounts. A quarter of all small firms were forced to close shop all together.”

“This exemplifies the paternalism that has typified this administration when dealing with the economy,” said Sen. John Cornyn, R-Texas. “They don’t actually believe that consumers know how to make good choices for themselves so they’re going to force a ... one-size-fits-all standard on the financial services industry.”"


It's amazing how understanding all of the facts really makes a difference.

 

[Aaron]

But the reporting is . . . "Republicans controlling the Senate passed legislation Tuesday to block new Obama administration rules that require financial professionals to put their client’s best interest first when giving advice on retirement investments like individual retirement accounts."

So maybe CBT can explain how the legislation does just that . . . ?

 

[Crabtownboy]

What is their reasoning for blocking it?

They are interested in profits over people. It is a pattern that is well established within the modern GOP. People with small accounts do not give significant campaign donations. Financial advisers give more significant donations.

I went to a dinner meeting given by a financial adviser a few years ago. He sounded good at the meeting. I set up an appointment with him, took my financial information to him. We made a second appointment for two weeks later. At that meeting he gave his advice. It sounded good until I began to question him. He had recommended putting money into a type of business that promised at least 7% a year. This he emphasized. What he did not say was how much of that 7% he took as an annual fee. He never brought up his fee until I asked him. Turns out his fee was 4%, meaning he would make more off my account than I. The 7% he had emphasized was only 3% before taxes. Not only that, in this venture, my money was to be locked up for at least 5 years. I would have no access to it, regardless of my needs, during that period of time. He did not emphasize this either until I ask. There was no requirement for him to be upfront and honest in his advice. I did not invest any money through him.

This is not an uncommon story. Of course, I had gone into the meeting a bit skeptical. I had learned years earlier that it is often unwise to listen to the advice of a stock broker. We could go into the reasons why if you would like.

When dealing with stock brokers or financial advisers be extremely careful and always skeptical. Ask lots of questions and do your research.

 

[annsni]

They are interested in profits over people. It is a pattern that is well established within the modern GOP. People with small accounts do not give significant campaign donations. Financial advisers give more significant donations.

From what I'm reading, this is the opposite of why the GOP blocked the stricter rules.

 

[Crabtownboy]

From what I'm reading, this is the opposite of why the GOP blocked the stricter rules.

A politician is never going to tell you he opposes or supports a bill because of his/her own interest.

Also, nothing like this is simply just a simple reason. Sure there are other reasons, but to simply say that an adviser is required to be honest should not be a problem for anyone.

 

[Zaac]

Who says Republicans have the people's best interest at heart?

From: https://www.washingtonpost.com/busi...b30806-21d1-11e6-b944-52f7b1793dae_story.html

Republicans controlling the Senate passed legislation Tuesday to block new Obama administration rules that require financial professionals to put their client’s best interest first when giving advice on retirement investments like individual retirement accounts.

The Senate passed the legislation to roll back the rules by a mostly party-line 56-41 vote. The regulations are aimed at blocking financial advisers from steering clients toward investments with higher commissions and fees that can eat away at retirement savings.

The new regulations, commonly known as the “fiduciary rule,” require advisers who charge commissions to sign a promise that they will act in the client’s best interests, earn “reasonable” compensation and disclose information about fees and conflicts of interest. It will take effect next April.

“It’s pretty simple. It says if you’re giving people advice on their retirement accounts, you should put the clients’ best interests ahead of your own,” said Sen. Patty Murray, D-Wash. “We’re here today because Republicans want to block that new rule from helping families. That’s just wrong.”

So as it stands right now, they don't have to make any recommendations that don't earn them a hefty commission even if it saves their clients money?

And the GOP voters are against this because it forces the financial professionals to not want to help small investors?

And the small firms who were obviously providing higher commissioned advice but not necessarily the most financially prudent advice were forced per Sen. Lamar, to close shop? ANd that's a bad thing?

 

[Crabtownboy]

So as it stands right now, they don't have to make any recommendations that don't earn them a hefty commission even if it saves their clients money?

And the GOP voters are against this because it forces the financial professionals to not want to help small investors?

And the small firms who were obviously providing higher commissioned advice but not necessarily the most financially prudent advice were forced per Sen. Lamar, to close shop? ANd that's a bad thing?

What is so terrible about making a financial adviser be honest and open in his/her advice?

Some folk on the board seem to always be in favor of business profits at their own expense.

 

[InTheLight]

Yet another example of a liberal's belief that good intentions outweigh whatever outcome would occur. Liberals don't care what the actual outcome of their plans are, so long as they have good intentions.

The regulations are aimed at blocking financial advisers from steering clients toward investments with higher commissions and fees that can eat away at retirement savings.

This is an attempt to regulate another industry by limiting the number of products that can be offered. Essentially, they want to dumb down investment decisions by steering everybody into an index based investment.

The new regulations, commonly known as the “fiduciary rule,” require advisers who charge commissions to sign a promise that they will act in the client’s best interests, earn “reasonable” compensation and disclose information about fees and conflicts of interest. It will take effect next April.

1. There already are rules on the books requiring investment firms to disclose fee information. Look at ANY mutual fund prospectus and you will see they are filled with pages and pages of fee information.

2. Investment advisers are to "sign a promise" to act in the client's best interest. Laff-able. See: Liberals, good intentions.

3. Investment advisers are to "earn reasonable compensation". Read: "earn what the government will dictate to them." This could be the toehold for salary caps on rich people and CEOs.

Bad legislation all around.

BTW, there already are "fiduciary rule" investment advisors. All an investor need do is select one of them. (They typically get paid by the hour, not with commissions.) A simple question up front, "will you sign a fiduciary rule statement to act in my best interest" is all that is needed to find these people. It's not difficult.

 

[Crabtownboy]

Yet another example of a liberal's belief that good intentions outweigh whatever outcome would occur. Liberals don't care what the actual outcome of their plans are, so long as they have good intentions.

Opinion, but no proof. Me thinks it is another conservative myth.

This is an attempt to regulate another industry by limiting the number of products that can be offered. Essentially, they want to dumb down investment decisions by steering everybody into an index based investment.

How is more information dumbing down?

1. There already are rules on the books requiring investment firms to disclose fee information. Look at ANY mutual fund prospectus and you will see they are filled with pages and pages of fee information.

We are talking about financial advisers, not mutual fund managers. Big difference.

2. Investment advisers are to "sign a promise" to act in the client's best interest. Laff-able. See: Liberals, good intentions.

Opinion, but no proof.

3. Investment advisers are to "earn reasonable compensation". Read: "earn what the government will dictate to them." This could be the toehold for salary caps on rich people and CEOs.

What is a reasonable fee? What is wrong with transparency. Conservatives like to talk about government transparency. Why not business transparency?

 

[InTheLight]

Opinion, but no proof. Me thinks it is another conservative myth.

It's proved time after time.

A good example is ObamaCare: Idea was to bring down health insurance costs while allowing you do keep your own doctor. How did that work out?

How is more information dumbing down?

If it were only more information the law was requiring, that would be fine. But the law would require investment advisors to steer clients away from investment products with commissions and fees. That removes choices, lots of choices. That's dumbing down.

What is a reasonable fee? What is wrong with transparency. Conservatives like to talk about government transparency. Why not business transparency?

Look at the prospectus for any popular investment product for retirement plans. Look at any contract for investment advice. The fees are spelled out in large, bold-faced fonts, typically at the very front of the documentation. Couldn't be more transparent. The consumer should be the one deciding what they want to pay for fees, not the government.

 

[Aaron]

Experience will never back down to opinion.

But facts are stubborn things.

 

[Crabtownboy]

But facts are stubborn things.

That must be why you reply with opinion as you seem to have no facts.

Do you have any experience with a financial adviser.

 

[Crabtownboy]

It's proved time after time.

A good example is ObamaCare: Idea was to bring down health insurance costs while allowing you do keep your own doctor. How did that work out?

We are talking about financial advisers, not government programs. Way offf topic.

If it were only more information the law was requiring, that would be fine. But the law would require investment advisors to steer clients away from investment products with commissions and fees. That removes choices, lots of choices. That's dumbing down.

Not my understanding. It required that fees be explained. Then the investor would have more information with which to make a decision.

A person should carefully examine any investment an adviser suggests. Too many just go on his/her advise and do not explore whether the investment has excessive fees or if it is a good investment. The adviser will get his/her cut and the investor takes the risk, say a capital loss.

The old adage that "if it sounds too good to be true it is too good to be true."

Look at the prospectus for any popular investment product for retirement plans. Look at any contract for investment advice. The fees are spelled out in large, bold-faced fonts, typically at the very front of the documentation. Couldn't be more transparent. The consumer should be the one deciding what they want to pay for fees, not the government.

I agree with you here. However not everyone has the background to understand a prospectus. There are tools available at just about any public library to investigate investments. With some it will take quite a bit of investigation.

Investing in a REIT is popular among financial advisers. In general people do not know much about them and their dangers. In general they do provide nice fees to the adviser, but often with great risk to the investor.

 

[InTheLight]

Not my understanding. It required that fees be explained. Then the investor would have more information with which to make a decision.

For Pete's sake! I quoted the article you posted. Do you read the articles you post? Here it is:

The regulations are aimed at blocking financial advisers from steering clients toward investments with higher commissions and fees that can eat away at retirement savings.

Let's look at this, shall we? Here's a hot mutual fund, Eventide Gilead ETGLX. It is a "Christian" fund or an "socially responsible" fund in that the fund managers are professing Christians and they only invest in companies that meet their ethical standards.

While it is a no-load fund, it's expense ratio is high to very high at 1.35%. (C shares of this fund have a 2.15% expense ratio.) Surely, this fund would be disqualified by the proposed law.

Had you invested $10,000 in this fund in 2008, before the crash, you would have $26,082 today.
Had you invested $10,000 in a low fee, low expense S&P 500 index fund before the crash, you would have $19,280 today.

I bet I could find over 100 examples of funds that beat the S&P500, but charge high fees and expenses. Should customers be "blocked and steered away from these funds"?

A smart investor doesn't use fees and expenses as the only guideline, after all, it is total return that is the gold standard for investments, not low fees. I would rather pay 1.5% in fees and make a 9.5% return than pay 0.5% in fees and make an 8% return.

A person should carefully examine any investment an adviser suggests. Too many just go on his/her advise and do not explore whether the investment has excessive fees or if it is a good investment. The adviser will get his/her cut and the investor takes the risk, say a capital loss.

Yes, an investor should do their due diligence. But this law is intended to reduce the options available to them, in effect, narrowing their choices.

 

[HankD]

Opinion, but no proof. Me thinks it is another conservative myth.

Me thinks perhaps the O/P is based upon a liberal spin.

HankD

 

[InTheLight]

BTW, I'm not invested in Eventide Gilead. It's too volatile for my age and investment objectives. But if I were a younger investor I might put some money into it (as a part of a diversified portfolio.)

 

[Crabtownboy]

BTW, I'm not invested in Eventide Gilead. It's too volatile for my age and investment objectives. But if I were a younger investor I might put some money into it (as a part of a diversified portfolio.)

Eventide had a very good year in 2015. It has backed off its high, which is to be expected on such a run-up up. It hit a high of about $29 in May 2015 and then backed off to $20 in February of this year. Today it is trading at $23.59. That chart pattern is in a developing stage without a desirableness trend.up or down.

It does appear rather volatile. You are right. It might be a good fund to look into if a person is young.

I never invested in mutual funds but in stocks and convertible bonds when I was younger. I kept point and figure charts on about 50 companies and made my investment decisions from the charts. Convertible bonds have some advantages over a companies stock.

 

[InTheLight]

Eventide had a very good year in 2015. It has backed off its high, which is to be expected on such a run-up up. It hit a high of about $29 in May 2015 and then backed off to $20 in February of this year. Today it is trading at $23.59. That chart pattern is in a developing stage without a desirableness trend.up or down.

It does appear rather volatile. You are right. It might be a good fund to look into if a person is young.

I used Eventide as an example of a high expense fund that the new law would not allow investment professionals to offer to their customers. This is a good example of why the law is a bad idea. There are hundreds of others.

Also, if investment firms were to only be allowed to offer low fee, low expense investment choices they wouldn't be in business very long.