The President wants the DOL to fine professionals who make money allowing 401k participants to make “bad” investments.
So what’s the difference between a “bad” and “good” investment? Right, well in the Will Rogersian world of politicians and regulators, “the good ones only go up in price; the bad ones go down”.
“Don’t gamble; take all your savings and buy some good stocks and hold it till it goes up, then sell it. If it don’t go up, don’t buy it.” WR
Plan sponsors and other financial professionals are supposed to know which ones will go in what direction… and NEVER (as Will would admonish) buy a security that is going to go down.
“Where have all the crystal balls gone? Gone to hindsightful regulators, all of them.” PP&M, sort of.
POTUS wants investment advisors to only select the “good ones”, and they are expected to know in advance where the market may be going, in both the short run and the long. And getting paid for their efforts, well that can’t be “good”, especially when the market value goes down.
Remember, “advisors” are mostly salespeople; regulators are mostly cops.
Do any of these guys have a clue about the workings of the stock market? Which is worse: having the foxes (advisors) in charge of the hen house (401k investment (not pension) plans), or having the lunatics (politicians & regulators) running the asylum (stock market expectations)?
Both are bad, unrealistic, and counterproductive. Markets rise and fall in price… the advisory deal is to limit the amount of risk in a portfolio. Risk of loss is always involved, but it can be minimized… regulators just don’t really get it.
Participants need to be educated not coddled; costs are not the most important aspect of retirement investing, net spendable income at retirement is; stock market values will always go up and down… and that’s a good thing.
If 401k participants are expected to be retirement ready, they need to know the importance of growing income and to have investment options that can get the job done.
I’m not sure that can be accomplished in the current 401k space, but the education has been available for a long time… and it can be applied fairly easily in a “self directed” 401k environment.
And that, Mr. President, is all you should be lecturing the investment advisory community about. If a plan participant is too lazy, busy, greedy, or preoccupied to determine “what’s inside” an investment option, it is not the fault of his or her employer.
The education is out there: just read The Brainwashing of the American Investor