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tony

Obama Targets Conflict Of Interest In Retirement Accounts

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This has gone viral! According to what I read so far, the administration has gotten it exactly right.

Quoting from Obama in the LA times article: "These industry doomsday predictions have not come true in other countries that have taken even more aggressive action on this issue than we're proposing," Obama said. "And if your business model rests on taking advantage, bilking hardworking Americans out of their retirement money, then you shouldn't be in business."

For everybody's information, the three other English speaking countries, Canada, UK and Australia have either outlawed conflicts of interests or demanded transparency of all costs.

 

http://ecreditdaily.com/2015/02/heres-how-the-white-house-wants-to-reduce-those-401k-ira-fees-eating-away-at-your-savings/ The PBS Frontline's Retirement Gamble is Mentioned.

LA Times: http://www.latimes.com/business/la-fi-obama-retirement-funds-20150224-story.html

http://abcnews.go.com/Politics/obamas-rule-retirement-account/story?id=29170251

http://www.washingtonpost.com/news/get-there/wp/2015/02/23/raising-the-standard-for-retirement-advice/

http://www.financial-planning.com/news/regulatory_compliance/fiduciary-proposal-more-bark-than-bite-2692001-1.html

http://www.forbes.com/sites/ashleaebeling/2015/02/23/obama-attacks-advisors-selling-snake-oil/

http://www.bloomberg.com/politics/articles/2015-02-23/obama-to-lead-push-to-toughen-broker-rules-for-retirement-funds

For the primary source, here's the White House's fact sheet outlining some of the proposals:

http://www.whitehouse.gov/the-press-office/2015/02/23/fact-sheet-middle-class-economics-strengthening-retirement-security-crac

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Here was my comment to a New York Times article on this topic. It rehashes a post I made on 403bwise in the past:

 

I don’t see any mention of non-ERISA 403(b) plans, the 401k-like plans available mainly to public education organizations. IRS changes in 2009 to 403(b) were touted as a modernization of the 403(b). The changes made the educational institution a fiduciary, where in the past they were just a conduit for the money to a variety of high fee insurance companies and a few low-cost providers. At that time many school systems pushed out the low-cost providers and chose one or two of the high fee insurance companies as their 403(b) plan. These decisions were often due to sweet-heart deals for administrators, old-boy network connections and financial ignorance. At my wife’s school she initially had Vanguard as an option, but in 2009 it was pushed out for AIG-Valic and ING based on the recommendation of an insurance consultant. At the roll out meeting I questioned the AIG rep about this and she said, "You people just don't get it. You have had 15 options for all these years. If you were in business and had a 401k, you would only have one option. You still have two good options. At VALIC, all we have is one option. We only have Vanguard..." I have never seen someone want to take back what she had said more than she did at that moment. What a smoking gun! It was as if the sky opened up and light was finally coming through years of darkness. My wife then asked why VALIC employees could have a true low-cost option, but she couldn't.

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Tony,

Yes Valic does and so does the National Education Association (NEA) for its 700 employees but NOT THE MEMBERS!

But these are 401k plans, where there is some fiduciary standards.

 

 

Hi jbs,

Thanks for your comment. You are exactly correct. I think having this national converstion might spill over to educators. Sooner or later our colleagues will become aware that they are getting annuity ripped off with the same issues that the administration proposes are addressing, conflicts of interest and trading investments to generate lucritive sales commissions for broker/dealers.

 

In the 403b world, its not only "administrators, old-boy network connections and financial ignorance", its our educational culture, we educators, the unions and the many trade magazines, that doesn't discuss this topic. Furthermore, here in California we have a cynical insurance code that mandates, under law suit threats from the major insurance companies, that every California district must offer 403b vendors that sign the IRS and information sharing agreements. Can you imagine some state law that would require districts must offer book publishers the same access? Instructional mayhem would result with dozens of different reading or math programs! But that's the 403b world, completely devoid of good ole fashion competition and, supply and demand.

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