retirement plan fees

Our Preference For High Cost, High Risk Private Retirement Plans Is Crazy

When you favor public solutions to important, yet costly universal needs, you are immediately labeled a socialist. To avoid this label, you have to ignore the shortcomings and outright failure of the private sector’s handling of important “commodities” like health insurance, health care and retirement savings? Who could say with a straight face that before the Affordable Care Act, health insurance was easy to get for everyone? Or that before the Department of Labor’s fee transparency requirements, the retirement services sector was working hard to make sure plan participants knew they were paying any fees at all?

I get it. We are not a country that likes everyone getting a highly sought after good. Someone has to get it and someone has to not get it so that we know we worked harder or are just better or more deserving than the other person.
But when we think like this, we let a small, privileged group of people reap huge rewards they didn’t earn. A group that understands our warped psychology and uses that knowledge to line their pockets...

Of course, the retirement and financial services industries are not the only sectors that take advantage of a status-focused and misinformed public. Nor does everyone in the industry engage in this kind of behavior. But lately I’ve been obsessed with just these guys. I’ve been reading a lot about financial fraud, including
insider trading and the CalPERS bribery scandal, and the amount of money some people make cheating the system has led to my of course they are stealing from our retirement savings attitude. By stealing I mean overcharging for the services they provide and making backroom deals for their own benefit. Again, not all of them, but enough that we should rethink our preference for the private sector’s high-costs, high risks retirement savings model. Continue Reading...


Protecting Retirement Savings Accounts From Wall Street


After much compromise, redrafting, haggling, interference, bullying and support, the Department of Labor issued its final version of the fiduciary rule on April 6, 2016. The fiduciary rule requires retirement plan advisors to put investors interests above their own when it comes to the products they recommend. Advisors will have to disclose, in writing, all fees, compensation and potential conflicts of interest associated with their retirement account recommendations.

Finalizing the fiduciary rule was a long and difficult process for the DOL and it did not get everything it wanted due to the intense opposition of those in the financial industry who saw the rule as a threat to their business practices. These in-the-best-interest-of-the-client opponents articulated their reasons for their opposition, including the costs of updating their computer systems and legal procedures. Basically, they are claiming that the disclosure paperwork they have to hire lawyers to draft, the minor changes they have to make to their computer systems and training their workforce to not take advantage of investors will be costly and burdensome to them.

Yet their lukewarm arguments were good enough to get the support of many members of Congress. Even after Wednesday’s announcement, some in Congress are still trying to stop the final rule from taking effect. But even if Congress succeeds in delaying the final rule (advisors already have two-years to get in full compliance with the final rule), Wall Street has heard the message of the Obama Administration and other retirement plan reform supporters.

You may or may not agree with Senator Elizabeth Warren’s statement that retirement plan service providers and fund managers are
“bleeding savers dry,” but Wall Street knows she’s not alone in her opinion. Continue Reading...


Unions Should Support The Health Insurance and Retirement Savings Needs Of All Workers

Organized labor deserves a lot of credit for its early efforts at getting health insurance and retirement benefits for workers. But labor also has a history of being slow to adapt to economic, social and political changes that challenge its mission. This has led to a slow erosion of labor union membership in the private sector. It has also resulted in attacks on the health and retirement benefits labor fought so hard for.

I applaud labor's support for the Affordable Care Act (aka Obamacare), and its wider support for universal health care. However, ironically, some of labor's biggest concerns these days involve provisions of Obamacare it sees as unfavorable to its members--the perceived threat to
multiemployer health care plans and the "Cadillac tax" (an excise tax on high value health plans). Granted, these provisions are not favorable to unions as they currently operate. But that's the public policy point. Union friendly policy makers are less concerned with the role of unions and more concerned about health and retirement plan access and affordability for everyone. I'm concerned that labor's historical reality of focusing on its narrow interests and its members may cause it to miss out on an opportunity to help achieve the universal health and retirement benefits it claims it wants.

There are several health insurance and retirement plan issues unions can support, and that are growing in economic, social and political importance.

Health care price transparency. Doctors, hospitals and insurance companies have given little substantive attention to the need for providing prices for medical care to consumers. Even as consumers are forced to assume a greater share of the cost of care by way of large deductibles, the medical care establishment consistently pushes back on real price transparency.

  • Labor unions should advocate for a change to the Employee Retirement Income Security Act (ERISA) to mandate real medical price transparency by insurers and health care providers. ERISA is a federal law that sets standards for private health and retirement plans. Currently, many insurers provide limited tools that give questionable estimates of cost for some care. Providers offer even less assistance and routinely prescribe care without any consideration of its price and if a cheaper alternative is available.
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Millennials Remain Skeptical of 401(k) Plans


I know quite a few millennials—some are nieces and nephews and others are children of friends and acquaintances. I love and admire them all. For the most part they are all smart "kids" who are decent and kind. But I must confess: I don't find them as interesting and awesome as their grandparents, parents and friends do. That’s probably because I can still remember being their age and thinking I was smarter and more interesting than my current self would find. Make sense?

Anyway, despite my aloofness towards millennials, I do enjoy having a "serious" conversation with them. Especially when the conversation is about some of my favorite subjects to talk about. In this case: workplace retirement savings plans; specifically 401(k) plans.

The Conversation

Recently I had dinner with two millennials. They are recent college graduates who are smart and focused. To their immense credit they are researching various retirement savings options. So, naturally, the conversation turned to workplace 401(k) plans. And my excitement barometer went way up when
one of these millennials called the 401(k) plan a scam.

Don’t get me wrong, I’m not offended by those words at all, I just never met a millennial that expressed their wariness of financial markets so abruptly. Personally, I think they have many reasons to be cautious.

  • They were in college during the worst recession of their and their parents’ lives
  • They know how difficult it is to find a job, let alone a good paying one
  • They also know about the government’s bailout of Wall Street
All the same, I hope they get over their worries and start saving now. Any type of saving will do, but I want them both to contribute to a 401(k) or similar plan. Here’s why. Continue Reading...

It's Time For Retirement Plan Sponsors To Take Control Or Not

Most Americans think that people who work in the retirement and investment services industry are extremely smart and component. And many of these workers are smart and competent, but not all of them. Every industry and profession has its not so smart and not so competent bunch. However, somehow just like doctors and lawyers, retirement and investment services workers enjoy an automatic elevated status in comparison to other professionals. Now there is nothing wrong with showing respect for a person's knowledge and skill level and the effort it took to obtain it, but should this come automatically?

No, it should not and here's why. When you place a person or profession in an elevated position, you are unlikely to question what they do, why, and how it will impact you. But even worse is that the person in that position is not likely to feel any obligation to share the information with you in the first place. See, they already know you are in awe of them and their credentials. They also know they intimidate other people. So much so that you'll pretty much agree to do whatever they suggest.

Don't agree? Then explain to me why most employers did not know what retirement plan fees they paid or that they paid them at all. Or explain to me why some employers don't know that they are the plan sponsor and fiduciary of their retirement plan and are ultimately responsible for their plan's compliance. Or better yet, explain to me how the retirement and investment services industry got so big so fast by offering routine services with very little risk to their bottom line.

Still not persuaded? Check out the minutes of any workplace retirement plan committee to see what if any questions they are asking their retirement plan representatives. And if the retirement plan reps participate in these meetings, you can bet that there is a lot of nodding in agreement going on. I know. I participated in these meetings and they go a lot like this: Continue Reading...

Can The Latest Financial Services Industry Trend Improve Worker Retirement Savings?


Some of the hottest news around these days involves the financial and retirement advisory services industry. First there was the Great Recession of 2008 highlighting the vulnerability of the most popular ways of saving for retirement—employer-sponsored 401(k) style plans and Individual Retirement Accounts (IRAs). Second, the gazillion published articles about the dismal level of retirement savings among Americans. Third, came the solutions to address a system that is somewhat exclusive, expensive, and difficult to navigate. These solutions include:
  • legislation to expand plan access,
  • legal and regulatory challenges to high plan fees and self-serving advisor behavior, and
  • technological innovation to make investing easier and more affordable
I welcome the continued legislative and legal battles in financial and retirement advisory services; especially if they result in more worker-friendly outcomes. But this latest trend of competitive online financial advisory services as a way to give individuals more low-cost saving options is a lot more exciting to me than the legislative and legal disputes over access and costs.

What Is An Online Financial Advisor?

If you are not into tech and don’t read any financial news, you probably never heard of online financial advisors or robo-advisors. They have been around for years but about eight years ago the concept started to really take off when new tech savvy start-ups updated their look and their services. The simplest way to describe these entities is to say that they are companies using computer portals to deliver financial advice and investment services.
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Stop Retirement Readiness Shaming


We Americans love our celebrations, holidays, and observances. In fact, an entire publication, Chase's Calendar of Events Annual, is devoted to listing and explaining them all. For example, today, April 12 is National Drop Everything and Read Day. This is a good day to observe. But I have another day, week, no month I want to observe--National Stop Shaming Americans' Lack of Retirement Readiness Month.

Seriously, if you set up a Google Alert for Retirement Readiness, and I did, you will receive dozens of links in your inbox daily. Of course folks in the financial services industry write many of these articles. But academics and behavioral economists write some. All coming to the same conclusion: overall, Americans need to save more for retirement. Enough with the surveys and the self-serving commentary.
How about writing about how retirement readiness can be greatly improved if:

  • Employers who sponsor 401(k)-style retirement plans are required to make matching or profit sharing contributions unless they can show it will result in financial hardship
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