S03.E15: Retirement Plans and Financial Advisers

[Athena]

 

Quote

Main segment: Retirement plans and financial advisers
Segments: 2016 Orlando nightclub shooting, Hillary Clinton becoming the Democratic presumptive nominee and Social media in the 2016 U.S. Presidential campaign

 

[Victor the Crab]

LWT rightfully paid tribute to Muhammad Ali in the previous episode. Here's hoping they do the same to hockey legend Gordie Howe, who passed away Friday morning.

[cattykit]

On 6/11/2016 at 7:49 PM, Victor the Crab said:

LWT rightfully paid tribute to Muhammad Ali in the previous episode. Here's hoping they do the same to hockey legend Gordie Howe, who passed away Friday morning.

Unfortunately he had an even bigger story to include.

The retirement story hit very close to home as I found myself involuntarily retired on Friday.  I was very late to the retirement savings game due to being a single parent but I've saved like crazy for the past four years, even going from a foreclosure three years ago to buying a house with cash last year.  And my 401K is in a money market that I'm going to move to a rollover IRA as soon as possible, where it will sit in the lowest fee, lowest volatility fund they can find.

I'm no Hillary fan, but she needs to remember that when you wrestle with pigs, you get dirty and the pig likes it.

Edited June 13, 2016 by cattykit

[Delwyn]

Obviously, the big takeaway from this episode is that Janice finally gives a fuck. 

[OneWhoLurks]

Bachelor of Financial Advising Certificate

Bachelor of Elf Spotting Certificate

[attica]

8 hours ago, cattykit said:

I'm no Hillary fan, but she needs to remember that when you wrestle with pigs, you get dirty and the pig likes it.

Eh, I don't think of that particular twitter exchange as 'wrestling with pigs' or fighting on Trump's field. I thought her dismissive tweet was actually pretty well-pitched. When you 'bye felicia' somebody, and their comeback is 'oh, yeah? well, you have cooties!', you're not in a feud. You've left them behind, sputtering and being laughed at by onlookers. Which is not to say that I think Hillary's team should go Full Beef on twitter, but a well-placed dig will always be welcome. So don't wrestle with pigs, but do make sure everybody sees it's your opponent in the sty.

[Primetimer]

You won't even need your elf-spotting degree!

View the full article

[dcalley]

It's interesting that the LWT staff didn't have a retirement plan until earlier this year. I loved that Janice in Accounting does give a fuck about $1 million in fees.

"What the fuck is a fiduciary?" From Merriam-Webster:

Quote

Fiduciary relationships often concern money, but the word fiduciary does not, in and of itself, suggest financial matters. Rather, fiduciary applies to any situation in which one person justifiably places confidence and trust in someone else and seeks that person's help or advice in some matter. The attorney-client relationship is a fiduciary one, for example, because the client trusts the attorney to act in the best interest of the client at all times. Fiduciary can also be used as a noun for the person who acts in a fiduciary capacity, and fiduciarily or fiducially can be called upon if you are in need of an adverb. The words are all faithful to their origin: Latin fidere, which means "to trust."

[Jamoche]

2 hours ago, attica said:

Eh, I don't think of that particular twitter exchange as 'wrestling with pigs' or fighting on Trump's field. I thought her dismissive tweet was actually pretty well-pitched. When you 'bye felicia' somebody, and their comeback is 'oh, yeah? well, you have cooties!', you're not in a feud. You've left them behind, sputtering and being laughed at by onlookers. Which is not to say that I think Hillary's team should go Full Beef on twitter, but a well-placed dig will always be welcome. So don't wrestle with pigs, but do make sure everybody sees it's your opponent in the sty.

Yeah, all the other places that have commented on it have been approving. Though it's possible John didn't get the full depth of the insult - I've never been in a twitter war so I didn't, until one of those sites explained it.

[iMonrey]

Well that was a sobering story and confirmed some of my worst suspicions about my 401k account. I'm going to have to watch it again, but I think at least John did say that Vanguard had a much simpler plan and that's who manages mine.

I guess for some reason I always thought this show was live; the little intro he filmed about the Florida attack made me realize for the first time it wasn't. But he shouldn't have to get down on himself and call his show stupid just because something tragic happened. It's not just joke-joke-joke on his show, he gives us valuable information too. I found the retirement savings piece very informative. And Kristen Chenowith sure is a good sport.

[Traveller519]

There are publications out there that rank funds against the indicies which they should most closely match. Simply looking up your fund on finance.google.com should reveal a Morningstar or like rating (the fund needs to have at least 5 years of history to get a rating however). Morningstar rates on net returns (after fees) relative to the market, so you can get a feel for how it performs.

There are absolutely reasons to have managed funds. I split my portfolio between actively managed funds and indexed funds, but you need to find the right type of manager, which is why it pays to do your research. A good manager's greatest benefits is knowing which stocks to sell off on a downswing and when. Thus your down cycles won't be as bad as in an indexed fund. I consider that as much defense in my portfolio as anything. Second, an actively managed fund is a very good way to go if you are diversifying your portfolio to include global markets. Somebody who is actively researching and monitoring those markets, is more likely to find a sustainable balance than an individual, who may not even be sure what index they are buying.

As a Canadian, my overall investment strategy at around 30 years is 25% Canadian Stocks; 25% US Stocks; 35% Global Stocks; 15% Bonds. My RRSP (401(k) equivalent) is mostly invested directly with a mutual fund company who only has actively managed funds, but each of my funds are 5-star rate by MorningStar, and none have fees in excess of 2%. The balance of my RRSP is through my company's plan, which is in indexed funds.

My personal savings are in managed indexed funds (invest in indexed funds, but auto-rebalance to my mix above, fees 1.07%), ETFs, and high-interest savings (which aren't particularly high at the moment, but still better than market).

Once you get this set up it's pretty easy to set and let it go. The most important thing is to set a contribution directly off your paycheck, and keep contributing.

[romantic idiot]

Eh, I don't think there's still any substantial proof that managed / specialised funds perform any better than the market index. So finding a good fund manager becomes a bit of a gamble, which I'm not sure i want to do with my retirement money. 

I do think he was a little hard on financial advisors though. Really depends on how the advisor is being incentivised. If it is the same commission for each fund, then it doesn't really matter, and usually the advisors will try to give good advice. The issue become more about how much they know rather than what they are doing with what they know. 

Edited June 13, 2016 by romantic idiot

[attica]

32 minutes ago, romantic idiot said:

I don't think there's still any substantial proof that managed / specialised funds perform any better than the market index.

In fact, besides Orlando the Cat,  there's quite a bit of proof that managed funds do significantly worse than index funds. In that linked article, though, we see that investors believe their funds are doing way better, so the financial industry has certainly succeeded in that regard. 

Traveller519, I'm guessing rules for this kind of thing are different in Canada, that socialist paradise. :) Please correct me if I'm wrong.

[Victor the Crab]

15 hours ago, cattykit said:

Unfortunately he had an even bigger story to include.

Given the circumstances surrounding the tragic events in Orlando, I'm not the slightest bit upset that they went this way.

When Janice from Accounting starts giving a fuck and changes her attitude, HOO-BOY that's saying a lot!

[Traveller519]

@attica Your article specifically touches on hedge funds, which are a whole different beast to Mutual Funds. Increased reporting requirements for publicly traded companies in the US coming out of Enron and WorldCom fiascos have made the arbitrage opportunities those types of investment funds made their huge profits on harder to come by. Also, if I read the article correctly it's comparing what the fund investors expected to make when they invested, versus what they actually made.

For non-savvy investors, exclusively going with Indexed Funds definitely isn't a bad option. You're going to do as well as the market does, and over a long time, history has shown us that equity markets offer the largest rates of return. Plus you don't have to worry about whether your Mutual Fund manager can beat the market. But that means you have no downward protection against market downturns, like in 2008. At that time, smart managers were among the first to sell off their stocks moving more of the investments of the funds to cash (not all, as that defeats the purpose of a fund, but some), but is then slower on the recovery.

There are two measures that are used to value financial return of an investment against market. Alpha and Beta. Alpha is how your investment performs nearest to its index. The number quoted is the percentage performance relative to the nearest index (i.e 0 is performing directly in line with the index, +2 is 2% better and -2 is 2% worse). Beta is the relative volatility of the investment, with 1 being the same volatility as the index, anything less than 1 being less volatile, anything more than 1 being more volatile.

Google Finance will quote the Alpha and Beta for just about any investment you can punch in from stocks to publicly traded bonds to mutual funds. Obivously all the information is historical. but if you can find an investment that has a 5+ year trend of having an Alpha above 0 and Beta below 1. That is a very good retirement investment.

Indexed funds will always have an Beta of close to one, depending on how quick the manager is at matching the makeup of the index when it changes, and an Alpha of just below zero, to account for the fees in that fund, which as John said, are MUCH lower than actively managed funds.

For a non-savvy investor. Here are my reasons to consider an actively managed fund.

1.  Size - Your retirement savings are large enough that you can afford to break off part of it away from your indexed fund invements already in place to diversity.
2. Diversification - Diversification is the bread and butter of retirement savings. If your entire portfolio is a fund indexed to the S&P 500, you're only ever going to do as well as that index. It would be like betting on the Yankees exclusively every year to win the World Series, no matter what. History has shown that's a good bet most years, but you're not protected in case something big happens. Hand in had with that is that you'll likely be entering into investments/markets that you have less daily dealings with. How do you make sure you get the right balance of overseas markets, finding a good fund manager who specializes in that is key. You may also have access to securities that can't be purchased on the open market and therefore aren't on an indexed fund.
3. Defense - Comes back to my above comment about 2008. Somebody with their finger on the pulse of the economy will be able to move more quickly to mitigate losses. This is especially important as you get closer to retirement age, as there's less time to come back from losses. Billy touched on this with the "Bonds" piece of the filmed segment.
4. Ancillary benefits - As I mentioned in my earlier post. The majority of my retirement investments are managed funds purchased directly from one reputable investment manager. My average fees with them are about 1.55%, in addition to the managed funds, that grants me an annual sit down with an investment adviser to review my overall financial position, quarterly market reviews, and an annual investors Christmas party. They're minor things but nice to haves.

To summarize. I think Indexed Funds should make up a good portion of anyone's retirement savings. If you're young and starting out, I think they should be all of your portfolio. As your portfolio grows, there may be reasons to look elsewhere to diversify. But, do your research before you purchase any investment. Advisors will always quote historical returns to you, but take a look at the Alpha and Beta and Morningstar reviews on Google Finance.

[futurechemist]

I think LWT could do an entire segment just on different job titles that sounds official and credentialed but in reality don't have any regulations behind them.

I recall reading an article that said the biggest determinant in long-term investment profits or losses is simply the percent bond vs percent stock.  What kind of bonds or stocks wasn't nearly as important as the bond/stock ratio..

Though I also thought this episode's message is hard to implement.  How many of us have any control over which brokerage is used?  Or have much control over what funds are available for us?  The company I work for doesn't use John Hancock, but if we did it's not like I could do anything about it.

[OneWhoLurks]

Quote

 

There's a reason Americans have begun habitually turning to John Oliver's HBO series Last Week Tonight when bad things happen in our country. It feels good to hear someone express in precise language the indignation and fury welling up in all of us—and what makes John Oliver so great at it is one distinct and powerful word-choice pattern.

[...]

Oliver has the advantage of an HBO-given right to profanity, and in this case he used it to choose "dipshit" over other popular choices like "gunman" or "extremist," or anything that might risk sounding sinister-cool and badass—directly kneecapping any fearful command said dipshit terrorist might have held.

It's not the first time Oliver has deftly undercut the power of terrorism with the power of common shit-talk; back in November, his spectacularly profane segment on the terrorist attacks in Paris deliberately selected "assholes" as its diminutizing epithet of choice. It's a good, insulting fight he's fighting. The world may be a scary place, but it's a little less frightening when it's full of dipshits and assholes rather than terrorists and bigots.

 

Why John Oliver’s Monologues on Mass Shootings Feel So Damn Cathartic

[attica]

Does it count towards my Icelandic Elf Spotting Certificate that I own a Bjork record? I really think it should...

[b2H]

20 minutes ago, OneWhoLurks said:

Why John Oliver’s Monologues on Mass Shootings Feel So Damn Cathartic

I think  John may be taking his approach from the phenomenal and dearly-missed Jon Stewart, who, it seemed to me, always, always, always hit the right note with these things.

[romantic idiot]

4 hours ago, Traveller519 said:

@attica Your article specifically touches on hedge funds, which are a whole different beast to Mutual Funds. Increased reporting requirements for publicly traded companies in the US coming out of Enron and WorldCom fiascos have made the arbitrage opportunities those types of investment funds made their huge profits on harder to come by. Also, if I read the article correctly it's comparing what the fund investors expected to make when they invested, versus what they actually made.

For non-savvy investors, exclusively going with Indexed Funds definitely isn't a bad option. You're going to do as well as the market does, and over a long time, history has shown us that equity markets offer the largest rates of return. Plus you don't have to worry about whether your Mutual Fund manager can beat the market. But that means you have no downward protection against market downturns, like in 2008. At that time, smart managers were among the first to sell off their stocks moving more of the investments of the funds to cash (not all, as that defeats the purpose of a fund, but some), but is then slower on the recovery.

There are two measures that are used to value financial return of an investment against market. Alpha and Beta. Alpha is how your investment performs nearest to its index. The number quoted is the percentage performance relative to the nearest index (i.e 0 is performing directly in line with the index, +2 is 2% better and -2 is 2% worse). Beta is the relative volatility of the investment, with 1 being the same volatility as the index, anything less than 1 being less volatile, anything more than 1 being more volatile.

Google Finance will quote the Alpha and Beta for just about any investment you can punch in from stocks to publicly traded bonds to mutual funds. Obivously all the information is historical. but if you can find an investment that has a 5+ year trend of having an Alpha above 0 and Beta below 1. That is a very good retirement investment.

Indexed funds will always have an Beta of close to one, depending on how quick the manager is at matching the makeup of the index when it changes, and an Alpha of just below zero, to account for the fees in that fund, which as John said, are MUCH lower than actively managed funds.

For a non-savvy investor. Here are my reasons to consider an actively managed fund.

1.  Size - Your retirement savings are large enough that you can afford to break off part of it away from your indexed fund invements already in place to diversity.
2. Diversification - Diversification is the bread and butter of retirement savings. If your entire portfolio is a fund indexed to the S&P 500, you're only ever going to do as well as that index. It would be like betting on the Yankees exclusively every year to win the World Series, no matter what. History has shown that's a good bet most years, but you're not protected in case something big happens. Hand in had with that is that you'll likely be entering into investments/markets that you have less daily dealings with. How do you make sure you get the right balance of overseas markets, finding a good fund manager who specializes in that is key. You may also have access to securities that can't be purchased on the open market and therefore aren't on an indexed fund.
3. Defense - Comes back to my above comment about 2008. Somebody with their finger on the pulse of the economy will be able to move more quickly to mitigate losses. This is especially important as you get closer to retirement age, as there's less time to come back from losses. Billy touched on this with the "Bonds" piece of the filmed segment.
4. Ancillary benefits - As I mentioned in my earlier post. The majority of my retirement investments are managed funds purchased directly from one reputable investment manager. My average fees with them are about 1.55%, in addition to the managed funds, that grants me an annual sit down with an investment adviser to review my overall financial position, quarterly market reviews, and an annual investors Christmas party. They're minor things but nice to haves.

To summarize. I think Indexed Funds should make up a good portion of anyone's retirement savings. If you're young and starting out, I think they should be all of your portfolio. As your portfolio grows, there may be reasons to look elsewhere to diversify. But, do your research before you purchase any investment. Advisors will always quote historical returns to you, but take a look at the Alpha and Beta and Morningstar reviews on Google Finance.

Agreed on looking at alpha and beta, but honestly, I think diversity should come more from non-equity investments themselves. I agree definitely that starting out should be equity, with a gradual move towards bonds and even FDs later on. 

[peeayebee]

I know I need to do more studying re my retirement account, but my brain just goes on hiatus when the subject of money comes up. Still, I liked his story about finances and advisors. I kept thinking about my sister who's planning on retiring in a few months. She's very worried about having enough money, and she has gotten into reading the Palm Beach Newsletter, a money advisement blog or something. She was into something else before, which I did a quick google on and found that it was, as I suspected, basically a the-sky-is-falling-everything's-falling-apart blog. 

Loved John's description of Trump as an ego-goblin who feasts on verbal filth.

BTW, when he was talking about googling teacup pigs, he said he and his coworkers used commas betw keywords. I always use plus signs. Is there a difference?

[dcalley]

2 hours ago, futurechemist said:

Though I also thought this episode's message is hard to implement.  How many of us have any control over which brokerage is used?  Or have much control over what funds are available for us?  The company I work for doesn't use John Hancock, but if we did it's not like I could do anything about it.

Yes, I've certainly never felt like it was worth it to say "this plan is not great," because the plan was well-established and I was not.

Here is a story on the elf school.

[romantic idiot]

But won't you have your own savings? We have a fund that employers contribute to and a separate amount which is tax free if invested in life insurance, some safe MFs etc. Of course, we don't have social security.

[OneWhoLurks]

Quote

 

Blackstone Group's Hamilton “Tony” James made the case for a guaranteed retirement account to address the current retirement savings crisis.

[...]

The proposed guaranteed retirement accounts would put the equivalent of 3% of employees' earnings into savings accounts that the employees couldn't withdraw from before retirement under any circumstances.

The new plan would be managed by professional money managers that would run sophisticated, diversified portfolios, generating significantly higher returns than ones directed by participants.

It would be “invested like a pension plan, not like a 401(k),” Mr. James explained, noting beneficiaries should not be the ones making investment decisions.

[...]

He said the crisis is much more obvious now than previously, which could enable national retirement reforms to actually happen. After all, even comedian John Oliver is now talking about it. (Mr. Oliver made retirement savings the top story on his show, “Last Week Tonight,” on Sunday before the conference.)

 

GFOR: Blackstone president discusses guaranteed retirement accounts

[candall]

I thought the "fiduciary" endorsement was fascinating, but JO didn't say exactly where that Good Housekeeping Seal of Approval comes from.  Is it a private oath?  A certification program?  A mandatory stipulation for x job title but not y?  Must google.

[OneWhoLurks]

Quote

Aaron Pottichen, retirement services practice leader at CLS Partners, a registered investment adviser, said Mr. Oliver's segment is a service to investors because it perpetuates an important discussion around retirement savings. However, he's skeptical it will ultimately do much to promote change.

“I think it helps, but it's kind of like we're shaving ice off an iceberg,” Mr. Pottichen said. “Ultimately, there's more underneath than what's on top. I think it's a step in the right direction, but I think it ultimately won't change things.”

All of the blame for whatever shortcomings exist in the retirement services industry can't be put entirely on the financial services companies, Mr. Pottichen said. Consumers bear some of the blame as well.

[...]

Some of the blame for poor 401(k) plans belongs to plan sponsors as well, according to Fred Barstein, founder and CEO of The Retirement Advisor University.

“I don't want to be seen as defending the industry, because there are some things we could obviously do better,” Mr. Barstein said. “But on the other side of that, this whole thing with indirect fees and revenue sharing and how fees got high, it all started because plan sponsors didn't want to pay and wanted to pass off the fees to their participants.”

It's difficult to engage small employers with their respective 401(k) plans — most small-business owners are worried about the day-to-day affairs of their business, and 401(k) plan management is often secondary to those concerns, Mr. Barstein said.

 

 

John Oliver lambasts U.S. retirement savings system, supports DOL fiduciary rule

[Hanahope]

Unfortunately, most employees with employer sponsored 401k plans have no real choice.  They either participate in the plan chosen by the employer, fees and all, or they shop around for an IRA with a bank.  Since most employees want that employer matching, they accept the 401k and are stuck with the fees.  Not all employers have good researchers with power than LWT apparently does.  I wonder if anyone has calculated out whether a 401k with matching contribution, but higher fees, results in more money than an IRA (or other do it yourself) with lower fees, but no employer contribution.

[OneWhoLurks]

Quote

 

“If you don’t play close attention, this doesn’t have to get away from you,” Oliver concluded in a tone of optimism. The Obama Administration has taken a quantum leap forward by implementing a rule that would force anyone offering retirement products to work in your best interest, that is, “fiduciaries.”

Financial services companies abhor this pro-investor rule — and have sued to prevent it from going into force next year — because it compels them to lower fees, get rid of needless commissions and do right by future retirees. They also claim it will reduce your ability to find low-cost retirement advice. That’s a bamboozlement.

You can get a plethora of low- or no-cost advice from any mutual fund company that offers index funds (Hint: Some of them are called Fidelity, iShares, SPDRs, Schwab and Vanguard , most of which manage my retirement funds).

You can also fight the industry by calling your Congressman and supporting the DOL’s “fiduciary rule.” Or, you can only use fiduciary advisers such as certified financial planners or demand that your employer or IRA provider only offer low-cost index mutual funds or exchange-traded funds.

 

Why John Oliver Is So Right on Retirement Plans, Advisers

[Quickbeam]

Both my cousin and my nursing school roommate "became" financial planners after failing at other careers. Neither could balance a checkbook. This episode supported my deeply held suspicion of the field. 

[b2H]

11 hours ago, Hanahope said:

Unfortunately, most employees with employer sponsored 401k plans have no real choice.  They either participate in the plan chosen by the employer, fees and all, or they shop around for an IRA with a bank.  Since most employees want that employer matching, they accept the 401k and are stuck with the fees.  Not all employers have good researchers with power than LWT apparently does.  I wonder if anyone has calculated out whether a 401k with matching contribution, but higher fees, results in more money than an IRA (or other do it yourself) with lower fees, but no employer contribution.

And here is the kicker:

If, like me, you move from job to job, there is a tax rule that will catch you of you are not careful:. If you work for a company that offers a 401K, even if you don't take the benefit, you cannot declare a tax advantage for in Individual Retirement Account (IRA).  There are other instruments you can use, but there is no way to take the IRA tax benefit, even if you refuse the 401K.  Very disconcerting.

[OneWhoLurks]

Quote

 

Unfortunately, buying low-cost index funds in a 401k plan is an option that only some firms offer. This can be set up through what is called a self-directed 401k. This allows the employee to invest their retirement funds however they like, rather than being limited to the mutual funds on their roster. Being limited to a number of funds provided by a specific 401k plan is like a Monopoly. The employee is forced to invest in a money manager that may or may not be good, and may or may not be charging high fees, but they don’t have a choice either way. The self-directed plan makes sense, because unlike other 401k plans, you will have the option of open architecture investing. Just like any other brokerage account, you can have the option to invest in stocks, bonds, ETF index funds, structured notes, options, alternative investments and more. Given the freedom to invest in what you prefer, you can choose lower cost products that have a higher upside potential.

There are a number of ways to find out if your firm has a self-directed 401k option. The first is to check on the 401k website. Once you login to your 401k online account, there would be an option one the site that says self-directed 401k. If you do not see this option on the website, the best way to find out about the plan is to call your 401k plan provider directly and ask if they offer a self-directed plan.

If your firm does offer a self-directed plan, the best way to about switching your plan is to call the plan provider and ask them to switch your plan to a self-directed plan. Once you have completed the paperwork, it is time to invest. Like Oliver said, for long-term investment, a wise strategy is buying low-cost index funds. Some examples of low-cost index funds are SPY, which represents the overall performance of the S&P, DTN, which represents the performance of 100 dividend-paying stocks, and PKW, which represents the performance of companies that have repurchased 5% of their stock in the past 12 months. I would also complement this strategy with high-quality stocks, and depending on your age, some high-quality bond funds or bond indexes.

 

Finding Transparency In Your 401k Plan

[OneWhoLurks]

Quote

 

“I think the John Oliver video has been a true tipping point,” said David Siegel, CEO of Investopedia, an online financial-information resource for investors.

Last Monday, the day after the HBO broadcast, Investopedia experienced a significant increase in the number of page views for articles about fiduciary duty and fees. For instance, an article entitled “An introduction to fiduciary advisors” received 256 page views, up from an average of 15 over the prior week.

“The increase in demand has been maintained,” Mr. Siegel said.

[...]

Kate McBride, chairwoman of the Committee for the Fiduciary Standard, said investment advisers have told her that clients are specifically asking for fiduciaries.

“In all the time I've been working on the fiduciary issue, I've never heard of that before,” Ms. McBride said.

 

John Oliver's criticism helps fiduciary duty go prime time

[peeayebee]

I thought about John when I received an email today from States United to Prevent Gun Violence:

Quote

The US Senate vote on the Terror Gap and Universal Background checks is scheduled to happen today at 5:30pm Eastern!

It's so critical that you take action now and take part in a historic day for the gun violence prevention movement. If you've already called your US Senators, call them again. Too often, our elected officials hear much more from those who disagree with us about these common sense gun safety measures needed to save lives and make our communities safer.

Call your US Senators at (202) 224-3121. Ask each of them to support the strong and effective Terror Gap and Background Check measures to keep guns out of the hands of those who should not have them.

Tell the staffer that answers - Hi, my name is ______ and I’m calling to let Senator _____ know that I want him/her to support strong and effective background check and terror gap amendments to keep guns out of the hands of those who should not have them.

  Please vote YES on the Feinstein No Fly No Buy amendment and YES on the Murphy Universal Background Checks amendment. Vote NO on the Cornyn and Grassley amendments.

I'm in California, so I know my senators (Boxer and Feinstein) will support the measures, but I wonder if I should still call.

[OneWhoLurks]

Quote

 

Congress is trying once again to overturn a U.S. Department of Labor rule that tightens the regulations on financial advisers, as the U.S. House of Representatives prepares to vote Wednesday on the red hot "fiduciary rule."

In one corner is House Speaker Paul Ryan. “Bureaucrats in Washington, D.C., have no business getting between you and your financial planner,” the Wisconsin Republican said in April, the last time the House took up the rule, which Ryan and other Republicans call “Obamacare for financial planning.”

In the other corner is President Barack Obama, many retirement experts, and, as of earlier this month, comedian John Oliver. Advocates say the rule, by requiring financial advisers to put their clients’ interests first when handling retirement accounts, will help protect savers from conflicts of interest that cost them $17 billion a year.

[...]

Wednesday should be anticlimactic. Based on Congress's past votes on the issue, Democrats have more than enough votes to sustain Obama's June 8 veto of Congress's resolution blocking the fiduciary rule. Wall Street’s best remaining chance may be one of several lawsuits filed against the fiduciary rule in the last month.

Meanwhile, investors have moved on from the political debate, to the extent they ever knew it was happening. Ryan, Roe, and other Republicans are defending a status quo that is rapidly disappearing. Investors are already fleeing non-fiduciaries, and many brokers are voluntarily taking on a fiduciary duty. Cheap index funds are being flooded with new money, while expensive actively managed funds shrink.

Crucially, financial firms are rushing to build cheaper alternatives for cost-conscious investors. The idea is to use technology to efficiently offer investment advice that puts the client's interests first. Anything else now seems ridiculous.

 

John Oliver vs. Congress: Which One Do You Trust With Your Retirement?

[OneWhoLurks]

Quote

 

Secretary of Labor Thomas Perez expressed no concern Wednesday about lawsuits that have been filed to stop the agency's regulation to raise investment advice standards for retirement accounts.

[...]

One claim that is included in several of the suits drew Mr. Perez's derision. It asserts that the best-interests contract in the rule curbs advisers' First Amendment rights by restricting when and how they talk to clients.

He said he talked about this cause of action with his siblings who are doctors.

“I called them up and said, 'If you're sued for malpractice, assert a First Amendment right to give crappy advice to your patients — see how far that goes,'” Mr. Perez said.

[...]

Mr. Perez also gave a shout out to comedian John Oliver for devoting 20 minutes to the rule on a recent broadcast of HBO's “Last Week Tonight with John Oliver.”

“Watch his show if you want to learn why this matters,” Mr. Perez said.

 

Thomas Perez points to two factors in DOL fiduciary rule's favor to prevail in lawsuits

[attica]

Paul Ryan held a vote last night --during the sit-in, herp derp -- to override POTUS's veto of the 'who cares if your adviser is ripping you off' bill; it failed.

[OneWhoLurks]

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So there is no inherent reason to favor individual investment accounts over any other retirement system, and 401(k)s and their ilk ought to be considered only in light of their usefulness for enabling actual old people to sit around baking cookies for their grandkids and such. And when one broadly examines various retirement tax benefits, two things are evident. One, they are failing miserably at their stated goal — most people near retirement have barely more than a pittance saved up. Two, these sort of tax benefits are horribly inefficient. Fully 70 percent of all the tax benefits produced by 401(k) system are claimed by the top income quintile.

That is the stone obvious consequence of any traditional tax break, since the more money you make, the more you pay in taxes. They automatically pay out inversely to need — and are thus a huge failed opportunity to distribute resources to people who actually need them.

One could argue about the best replacement for retirement tax shelters (personally, I'd scrap the 401(k) and similar policies, uncap the payroll tax, and plow the proceeds into Social Security). But the role of government ought to be to provide broad material security as far as practicable. A monstrously complicated and unfair savings incentive does not fit that bill, no matter how much it flatters traditional notions of middle-class virtue.

 

What John Oliver gets wrong about 401(k)s

[Julia]

On 7/3/2016 at 6:02 AM, OneWhoLurks said:

What John Oliver gets wrong about 401(k)s

I really don't agree with that. For a number of years I didn't have enough deductions to itemize, and one of the few breaks I got was having pre-tax money taken off my paycheck for my 401k and my transitchek. Even the anemic match my company gives me has added up to a nice cozy sum over the years. In the meantime, I haven't paid taxes on the amount my 401k has increased.

I would argue that more people should have access to those benefits. There's no reason why a woman making the minimum wage should be paying payroll taxes on the money she uses to pay 100% of the cost of transportation and what little she can sock away in savings while I don't.

Edited July 8, 2016 by Julia

[Rancide]

On 6/13/2016 at 6:12 PM, futurechemist said:

Though I also thought this episode's message is hard to implement.  How many of us have any control over which brokerage is used?  Or have much control over what funds are available for us?  The company I work for doesn't use John Hancock, but if we did it's not like I could do anything about it.

You may have more control than you think.  Find out who is in charge of your company's 401k plan and, if there are no low-cost index funds in it, send them an email asking them to add some.  I did this with my mid-size (~4000 employees) employer a few years ago, and new options appeared within 6 months.  At the time I asked, we had only one index fund option.  We now have four.  A lot of employers are getting nervous about what their own responsibilities might be towards managing 401k plans and are therefore increasingly responsive to employee requests.  Unless you work for a really tiny company, there's no reason why your company shouldn't be able to offer some low-cost options, and there is no harm in asking.

[Rancide]

On 6/15/2016 at 6:13 AM, Hanahope said:

I wonder if anyone has calculated out whether a 401k with matching contribution, but higher fees, results in more money than an IRA (or other do it yourself) with lower fees, but no employer contribution.

In likely near 100% of cases, employer match makes it worth participating even if fees are terrible.  Employer match is free money--instant profit.  When people talk about terrible fees, they mean 1%-3%, which is a huge percentage of your total returns if the market is only returning 4%-6% but is still relatively small compared to the huge bonus that employee match brings.  

Even if your employer is only matching, say, 25%, that still beats the fees by a big amount.  If you put in $1, and your employer puts in $0.25, and then exorbitant fees take out $0.03, and you're still ahead by quite a bit.

Best advice for bad 401k options is contribute to the full amount necessary to get the full match and then if there's money left over, invest elsewhere.

[OneWhoLurks]

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The Department of Labor passed a new rule earlier this year requiring that financial advisors who work with clients on retirement plans abide by a fiduciary standard. Unfortunately, in order to get the new rule passed, the DOL made some concessions to the financial industry.

Why? Because various financial services organizations voiced concerns about how this new rule would have a negative impact on investors and that it would hamper a broker (with non-fiduciary duties) from generating any profits.

As a result, the rule is riddled with loopholes that keep it from adequately eliminating conflicts of interest that can be detrimental to investors. Brokers can still sell proprietary products to clients — products for which they get paid a commission and/or that will benefit their own firm's bottom line — as long as they provide dense legalistic disclosures.

 

John Oliver correctly used the ‘F word’ on TV about advisors

[OneWhoLurks]

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Ironically, several large 401(k) plan providers have been sued by their employees for excessive fees in their own 401(k) plans. You read that correctly. The employees who work for some of the biggest 401(k) providers aren't willing to subject themselves to the same hefty fee arrangements they are charging other investors. Basically, the chef isn't willing to eat his own cooking.

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There is however, a silver lining. There was a major Supreme Court ruling against Edison International, the power company giant. The Supreme Court decision will likely make it easier for 401(k) plan participants to sue their employers for choosing investments that impose excessive fees, especially when those decisions were made years before lawsuits are filed.

The case concerned exactly when the role of a retirement-plan administrator in monitoring a plan's performance can trigger liability under the federal Employee Retirement Income Security Act, known as ERISA.

 

Hidden 401(k) fees can destroy your retirement dreams

[OneWhoLurks]

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Birdthistle’s pun-titled exposé, Empire of the Fund: The Way We Save Now, takes sharp jabs at how the nation’s mutual funds — which hold $16 trillion in assets — and 401(k)s are run. He’s especially peeved about their “perverse” system of fees. He’s not alone: More than a dozen lawsuits have been filed challenging 401(k) fees since last September, according to Pension & Benefits Daily.

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The Failure of the U.S. DIY Retirement System

“More and more studies have shown irrefutable evidence that in the experiment of putting all this money in the hands of individual investors, the results just aren’t there,” Birdthistle told me during our freewheeling interview about the book. “One third of Americans have no retirement savings and, of the cohort about to go into retirement, they have $111,000 on average, which works out to about seven grand a year.”

 

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Why don’t more investors look for funds with low fees?

The problem is many people have the intuition that paying the least amount is not the way to get good performance. Paying the least for a haircut or for tacos usually is not a great way to go. But mutual funds are a very unusual market; it’s one of the only types where price and performance are inversely correlated. That’s hard to get your head around.

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John Oliver recently took the retirement industry to task in his HBO show. What did you think?

I hope it’s part of a drumbeat. People are coming to grips with the idea that the system is more complicated than we give it credit for.

I wish there were more John Oliver pieces out there.

Why Mutual Funds And 401(k)s May Be Hazardous To Your Wealth

[OneWhoLurks]

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Even if firms wanted to go back, would their customers let them? Presidential attention didn’t just change the rules. It helped change how investors shop for financial help. Journalists had a new excuse to repeat their warnings about conflicted advisers and high fees.

So did comedians. In June, shortly after Obama vetoed a congressional resolution that would have blocked the DOL rule, John Oliver spent most of his show, Last Week Tonight, talking about the dangers of high-fee retirement plans and nonfiduciary advisers. Kristin Chenoweth and Billy Eichner were enlisted to drive home the advice. So far, 5.7 million people have watched Oliver’s video on Youtube. Money Magazine put Oliver on its cover last month, declaring him the year’s “Money Champion.”

For the first time, people seemed to understand what the experts and better-informed investors had been trying to explain — that high fees and conflicts of interest are dangerous for anyone saving for retirement. Those ideas were already driving a surge of money into low-cost index funds and away from expensive actively managed funds. Over the last couple years, they took hold among the wider public. 

 

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“They didn’t necessarily know what ‘fiduciary’ means, but they have learned [that] they only want to work with a fiduciary,” Garrett said. Those requests only increased over the past year, she said, with many of her customers citing Oliver’s influence.

Congress and Trump may try to dislodge the new regulations, but some of the changes to Wall Street business models and investor perceptions look permanent. The old models relied on customers’ trust, and ignorance. These days, if you’re an adviser sticking to the familiar sales pitch, be prepared for a barrage of tough questions.

You have Obama to blame.

 

How Obama Changed Investing Forever