Author Topic: The White House proposes a new rule to help preserve retirement savings  (Read 10085 times)

clarkevii

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Why on earth would you keep money with someone who opposes a law that would make them act in your best interest?

http://www.washingtonpost.com/posteverything/wp/2015/02/23/the-white-house-proposes-a-new-rule-to-help-preserve-retirement-savings/

SaintM

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #1 on: February 23, 2015, 09:48:32 AM »
This is why I will gladly pay $9 in a commission to an online broker to buy shares of an individual stock.  I never read or listen to any of the shit peddled by analysts or brokers.

Even Vanguard cannot boast a fixed, non recurring cost structure.

Saving in Austin

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #2 on: February 23, 2015, 10:02:06 AM »
I posted a comment below the Wapo article this morning criticizing financial advisors and linking to Jim Collins stock series and the moderator took it down. I'm thinking someone in the financial industry reported it as abusive.

Vilgan

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #3 on: February 23, 2015, 10:06:17 AM »
I find it interesting that this has to come from the Labor Department. The SEC is so interwoven with the banks with many of its commissioners coming from those ranks and going back to them when done, they never actually do anything.

Should brokers who have the power to make decisions for their clients commit to making those decisions in the client's best interests rather focusing on purchases that have high commissions? Of course, but the SEC is making ridiculous statements about how it will reduce choice.

This is a change that the SEC should have been championing decades ago, but instead the Labor department is having to step in and do their job for them.

Vilgan

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #4 on: February 23, 2015, 10:11:11 AM »
This is why I will gladly pay $9 in a commission to an online broker to buy shares of an individual stock.  I never read or listen to any of the shit peddled by analysts or brokers.

Even Vanguard cannot boast a fixed, non recurring cost structure.

That makes no sense. You can stocks with Vanguard just like any other broker. The only difference is you won't pay as much: 7$, 2$, or free depending on how large your account is. If you really want to ignore the investment advice of basically everyone out there including Buffett and invest in individual stocks, at least get a better price than $9. The Robin Hood app offers free trades from the get go, although it can take a bit to progress through their waiting list.

seattlecyclone

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #5 on: February 23, 2015, 10:13:32 AM »
This is why I will gladly pay $9 in a commission to an online broker to buy shares of an individual stock.  I never read or listen to any of the shit peddled by analysts or brokers.

Even Vanguard cannot boast a fixed, non recurring cost structure.

You're free to invest in what you want, but I find it a bit of a ridiculous argument that $9 commissions for individual stocks are somehow a better deal in terms of fees than Vanguard index funds.

If you pay $9 per stock for each stock in the S&P 500, that will cost you $4,500. Then when you sell them it's another $4,500. By comparison, $9,000 is about what you would pay to invest $500k in Vanguard's S&P 500 index fund for 30 years. In return for their paltry 0.05% expense ratio, you get the ability to buy and sell part of your holdings and reinvest dividends without paying a $4,500 transaction fee.

Eric

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #6 on: February 23, 2015, 10:27:54 AM »
Why on earth would you keep money with someone who opposes a law that would make them act in your best interest?

Mostly, you have no choice.  A lot of these rip off options are through 401k plans.

I can't wait to hear all the asinine excuses that are going to be used to oppose this.  One I've already heard is that it will drastically limit the investors options.  Like somehow limiting choices to funds with non-ridiculous fees is a bad thing.

Vilgan

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #7 on: February 23, 2015, 10:34:22 AM »
Why on earth would you keep money with someone who opposes a law that would make them act in your best interest?

Mostly, you have no choice.  A lot of these rip off options are through 401k plans.

I can't wait to hear all the asinine excuses that are going to be used to oppose this.  One I've already heard is that it will drastically limit the investors options.  Like somehow limiting choices to funds with non-ridiculous fees is a bad thing.

Yeah, I remember when I started helping my mom dig into her investments in her 403b. She paid a 5% load and then 2% ER a year until we started looking into it together. That's one "investor option" that deserves to die a fiery death. Its been over a year and I still get angry thinking about it.

Beridian

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #8 on: February 23, 2015, 10:41:01 AM »
Damn those jack-booted government socialist thugs interfering with free enterprise!  The rights of businesses to fleece the less sophisticated members of society is inherent in the constitution!  When will we dispense with  the nanny state and let free markets reign?

The free market would have handled this problem just as well, see if the stupid old people go broke they will not refer their friends to the bad brokerage houses and they will eventually go out of business.  See!  A free market solution!

SaintM

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #9 on: February 23, 2015, 05:04:43 PM »


You're free to invest in what you want, but I find it a bit of a ridiculous argument that $9 commissions for individual stocks are somehow a better deal in terms of fees than Vanguard index funds.

If you pay $9 per stock for each stock in the S&P 500, that will cost you $4,500. Then when you sell them it's another $4,500. By comparison, $9,000 is about what you would pay to invest $500k in Vanguard's S&P 500 index fund for 30 years. In return for their paltry 0.05% expense ratio, you get the ability to buy and sell part of your holdings and reinvest dividends without paying a $4,500 transaction fee.
[/quote]

I don't want 500 companies--most of them are shit.  I want 7.  My $1M+ portfolio cost about $150 to set up and nothing thereafter.  Dividend reinvestment is a no cost option until I choose to turn it off and FIRE.  A Vanguard fund, even at .05%, would cost $500 per year, and would increase with growth and reinvested dividends.

Before you extoll the virtue of diversification, let me explain that I really don't care about price movements.  In fact, I would prefer prices stay down while I reinvest in new shares every quarter.  I make more money that way.

Emilyngh

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #10 on: February 23, 2015, 05:18:58 PM »
Wonderful news that it's even being seriously considered.   Thanks for sharing!

gimp

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #11 on: February 23, 2015, 06:29:49 PM »
I'm glad someone posted this, I was going to.

This is awesome news, and helpful to pretty much everyone except financial advisors - and they can go fuck themselves.

I'd also like it if, as part of this proposal, there was a standardized 401k chart that was mandatory to display. In it, the following: fund name, commission, yearly expense ratio (including all costs) - or if they prefer, yearly expenses on $10k invested, and finally estimated yearly taxes (again, % or $ on $10k). That is the cost chart, and the cost chart cannot include performance data, so nobody puts a 20% year-over-year gain next to a 2.5% fee to pretend it's a good investment.

And it's through this chart that one must make their fund selections. Not through the chart of last year's gains.

Edit: This is a nicely a-political discussion so far. Hope it stays that way...
« Last Edit: February 23, 2015, 06:34:34 PM by gimp »

Indexer

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #12 on: February 23, 2015, 06:37:02 PM »
I don't want 500 companies--most of them are shit.  I want 7.  My $1M+ portfolio cost about $150 to set up and nothing thereafter.  Dividend reinvestment is a no cost option until I choose to turn it off and FIRE.  A Vanguard fund, even at .05%, would cost $500 per year, and would increase with growth and reinvested dividends.

Before you extoll the virtue of diversification, let me explain that I really don't care about price movements.  In fact, I would prefer prices stay down while I reinvest in new shares every quarter.  I make more money that way.

 $9/trade?  There are plenty of firms that do it a lot cheaper than that.  If you buy or sell shares it costs you money so there are future costs unless you never make another trade.

Being diversified is more important than managing price movements.  A stock index fund has price movements that can be 30-40% in either direction.  Diversification at its core is about removing company risk, the risk that a single company can go under.   Any of your companies could go under and there goes 10-20% of your portfolio and it will never ever recover, they are gone.  That is what diversification protects against.  And before you say you have researched these companies and you know they are safe answer the following questions.

* How would you know Enron was going under when the analysts in charge of following it, and the auditors didn't even know about the hidden accounts(which you really wouldn't have access to)?
* How would you know before the financial crisis that out of all the banks Wachovia would be the one to disappear?  It wasn't even on the Treasury/Fed's radar early on.   
* When Blackberry had a near monopoly on smartphones and smartphone sales were growing rapidly how would you know that Apple & Google would basically put them out of business in a couple years when Apple & Google weren't even in smartphones at the time?
* How would you know Barings Bank would be brought down by 1 lone currency trader in the pacific through bad derivative bets?
* Which of your 7 companies won't be around in 10 years?

If you can answer all 5 questions you are good to go.  To bad I don't know a single expert who could honestly answer all five.  I'll own 3500+ companies knowing that many will fail, but I won't even notice. 

Ynari

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #13 on: February 23, 2015, 06:47:50 PM »
Wait, does anyone have the wording of the actual rule?  Maybe my reading comprehension isn't up to speed, but I couldn't find what restrictions were actually going to be implemented.

phillyvalue

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #14 on: February 23, 2015, 06:57:16 PM »
Without getting into the always fun argument of investing in the index vs individual stocks, Interactive Brokers is probably the best place to be for active investors. Typically well under $1 per trade. There is a monthly minimum  fee, but basically if you are paying $9/trade now, you'd save money if you averaged just 2 trades per month.

clarkevii

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #15 on: February 23, 2015, 06:58:45 PM »


You're free to invest in what you want, but I find it a bit of a ridiculous argument that $9 commissions for individual stocks are somehow a better deal in terms of fees than Vanguard index funds.

If you pay $9 per stock for each stock in the S&P 500, that will cost you $4,500. Then when you sell them it's another $4,500. By comparison, $9,000 is about what you would pay to invest $500k in Vanguard's S&P 500 index fund for 30 years. In return for their paltry 0.05% expense ratio, you get the ability to buy and sell part of your holdings and reinvest dividends without paying a $4,500 transaction fee.

I don't want 500 companies--most of them are shit.  I want 7.  My $1M+ portfolio cost about $150 to set up and nothing thereafter.  Dividend reinvestment is a no cost option until I choose to turn it off and FIRE.  A Vanguard fund, even at .05%, would cost $500 per year, and would increase with growth and reinvested dividends.

Before you extoll the virtue of diversification, let me explain that I really don't care about price movements.  In fact, I would prefer prices stay down while I reinvest in new shares every quarter.  I make more money that way.
[/quote]

Very cool. Have you checked out Interactive Broker? Mostly $1-2 per transaction

johnny847

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #16 on: February 23, 2015, 07:07:17 PM »
Edit: This is a nicely a-political discussion so far. Hope it stays that way...
Well it already seems like this will devolve into a dividend investing vs total us stock market indexing discussion, which has already been beat to death in other threads, and neither party ever changed their views on.

SaintMichael, I do not want to get involved in this debate, but I do have one question for you. Can you clarify what you mean by
My $1M+ portfolio cost about $150 to set up and nothing thereafter.
Are you just not buying more shares with cash? I'm a bit confused how you're not incurring any more commissions otherwise. I guess that would make sense if you FIRE'd already.


I especially like this part of the WaPo article, which is actually the author quoting USA Today
Quote
“The industry opposes [the proposed rule], claiming, as they so often do in these cases, that it would limit consumer choice and increase consumer costs in a way that is particularly disadvantageous to low-income savers. It’s a disingenuous argument because there would be no impact if brokers were already acting in the clients’ best interests. What they are saying is that they are currently willing to offer their services to the low-income bracket because they will reap even higher profit from hidden costs and fees. Their opposition to the rule is virtually proof that it is necessary.”
Emphasis mine.

gimp

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #17 on: February 23, 2015, 07:17:30 PM »
Wait, does anyone have the wording of the actual rule?  Maybe my reading comprehension isn't up to speed, but I couldn't find what restrictions were actually going to be implemented.

No. This is basically a pre-announcement that work is being done to come up with a proposal. A combination of politicking, leverage, and request for input from interested parties. However, I think things are close enough that it won't be entirely vaporware - I think a good faith effort will be made on the topic. Whether one ends up implemented and how much it gets watered down is anyone's guess, but frankly, every little bit helps so I'd rather something half-way there than nothing.

We'll see!

Also, yeah, this is probably a stupid place to discuss how awesome your (general your) investing strategy is. This conversation isn't about that... it's about normal people methods of investing into 401ks.

Indexer

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #18 on: February 23, 2015, 07:18:19 PM »
The sad part about this article is that the worst firms see it coming, and they are reacting.

They are just doing fee only accounts instead of commission accounts.  Ed Jones, Morgan Stanley, the banks, etc. are all promoting wrap accounts.  They load up these wrap accounts with the no load versions of the same mutual funds they were using before.  So its still American Funds, Franklin Templeton, Putnam, etc.  They charge 1.5% + mutual funds with 1% ERs.  So no, you aren't paying a 5.75% front end load anymore with 0.5% 12b1 fees and a 1% ER.  You are just paying 2-2.5% every single year.

When asked why the advisor picked a fund with a 1% ER instead of a 0.05% ER index fund he can just say he thinks it was going to do better for whatever BS reason.  FINRA and the SEC won't go to that level of scrutiny because it would put basically everyone but Vanguard/Schwab/Blackrock(iShares), and independent advisors who use those companies funds/ETFs out of business. 

The one shining light of good news.  Its going to be hard to justify a variable annuity with high fees for anyone under 60. 
« Last Edit: February 23, 2015, 07:20:15 PM by Indexer »

surfhb

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #19 on: February 23, 2015, 07:21:11 PM »

Before you extoll the virtue of diversification, let me explain that I really don't care about price movements.  In fact, I would prefer prices stay down while I reinvest in new shares every quarter.  I make more money that way.

Umm  yeeeah

chasesfish

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #20 on: February 23, 2015, 08:07:04 PM »
Its just more regulation, attempting to collect fines, and employing government officials instead of fixing the real problem:  Why is there preferential treatment for an employer sponsored plan?

Just let everyone contribute up to $17,500 in an IRA. 

Then an individual can choose how much to pay their investment adviser. 

Alabaster

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #21 on: February 23, 2015, 10:22:43 PM »
Its just more regulation, attempting to collect fines, and employing government officials instead of fixing the real problem:  Why is there preferential treatment for an employer sponsored plan?

Just let everyone contribute up to $17,500 in an IRA. 

Then an individual can choose how much to pay their investment adviser.

FUCK, YES!

Assuming of course that my employer can make contributions as well. I don't get why I can't choose better funds in my 401K. It seems really silly.

Vilgan

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #22 on: February 23, 2015, 10:49:42 PM »
Its just more regulation, attempting to collect fines, and employing government officials instead of fixing the real problem:  Why is there preferential treatment for an employer sponsored plan?

Just let everyone contribute up to $17,500 in an IRA. 

Then an individual can choose how much to pay their investment adviser.

While I would FAR prefer being able to send my 18k to Vanguard instead of just picking from what my 401k has available, I think that providing choice without a LOT more structure/legislation is harmful to the majority. With a 401k you at least have a group of people that are supposed to look out and insure the options are good and the company can be sued if they ignore their fiduciary duty. The idiotic stuff that the average person can get up to if given free reign is astounding. Letting everyone send their money to an IRA and then make decisions from there would be open season on the American public with Wall Street being the prime benefactor.
« Last Edit: February 24, 2015, 08:50:01 AM by Vilgan »

johnny847

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #23 on: February 23, 2015, 10:52:03 PM »
Its just more regulation, attempting to collect fines, and employing government officials instead of fixing the real problem:  Why is there preferential treatment for an employer sponsored plan?

Just let everyone contribute up to $17,500 in an IRA. 

Then an individual can choose how much to pay their investment adviser.

FUCK, YES!

Assuming of course that my employer can make contributions as well. I don't get why I can't choose better funds in my 401K. It seems really silly.
And even without allowing employer matches to go into an IRA, this would be a huge step in the right direction. It would (hopefully) put some pressure on 401k administrators to actually provide decent funds in 401ks.

coppertop

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #24 on: February 24, 2015, 10:36:43 AM »
I am NOT a fan of financial advisers, and I am for anything that reins in their greed.  When I was an estate and trust paralegal, I saw one guy who regularly cultivated the wives of wealthy-but-ill old men; then when the husbands died, the financial adviser swooped in, ready to steer them into all sorts of investment options that greatly enriched he, the financial adviser.  These elderly ladies never knew what hit them.  My boss felt that ethically, he could not say anything, because these women were not mentally incapacitated in any way ... just not savvy and way too trusting of anyone with an oily grin.

Vilgan

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #25 on: February 25, 2015, 09:21:01 AM »
And even without allowing employer matches to go into an IRA, this would be a huge step in the right direction. It would (hopefully) put some pressure on 401k administrators to actually provide decent funds in 401ks.

That makes no sense. Why would 401k plan administrators want to compete? They offer 401k plans as a benefit, not because they are making money off of them. Most companies would happily shut down their 401k plan and celebrate the savings of money and employee time related to 401k plans.

The companies selling the plan won't give 2 hoots either, they'll be too busy chasing after all these new idiots with tons of money in their IRA and no clue what they are doing.

Replacing 401k plans by carving out a similar amount of money in an IRA sounds great to those who know what they are doing or think they know what they are doing. However, it would ultimately reduce the odds of successful retirement for the majority of Americans unless there are a lot of other changes that go on at the same time to protect the sheep from the wolves.

johnny847

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #26 on: February 25, 2015, 09:28:06 AM »
And even without allowing employer matches to go into an IRA, this would be a huge step in the right direction. It would (hopefully) put some pressure on 401k administrators to actually provide decent funds in 401ks.

That makes no sense. Why would 401k plan administrators want to compete? They offer 401k plans as a benefit, not because they are making money off of them. Most companies would happily shut down their 401k plan and celebrate the savings of money and employee time related to 401k plans.

The companies selling the plan won't give 2 hoots either, they'll be too busy chasing after all these new idiots with tons of money in their IRA and no clue what they are doing.

Replacing 401k plans by carving out a similar amount of money in an IRA sounds great to those who know what they are doing or think they know what they are doing. However, it would ultimately reduce the odds of successful retirement for the majority of Americans unless there are a lot of other changes that go on at the same time to protect the sheep from the wolves.
Imagine if the government changed the rules such that whether or not you have a 401k at work, you are allowed to contribute to the 401k maximum (currently $18k) to an IRA instead. Also suppose that you can direct your employer to put a 401k match into an IRA instead.

Now because you can choose to have your IRA with any custodian you desire, there is no reason to contribute to your 401k if your 401k offers poor funds. Therefore, you would put your money in an IRA instead. Thereby putting pressure on 401k administrators to offer better funds, because they've suddenly lost clients.

MDM

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #27 on: February 25, 2015, 12:22:45 PM »
That makes no sense. Why would 401k plan administrators want to compete? They offer 401k plans as a benefit, not because they are making money off of them. Most companies would happily shut down their 401k plan and celebrate the savings of money and employee time related to 401k plans.
This assumes "plan administrator" = "employer".  In some cases that is completely true.  In others, the employer subcontracts plan administration to a 3rd party.  In those cases, the 3rd party very much makes money off of them.

jmusic

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #28 on: February 25, 2015, 01:31:22 PM »
And even without allowing employer matches to go into an IRA, this would be a huge step in the right direction. It would (hopefully) put some pressure on 401k administrators to actually provide decent funds in 401ks.

That makes no sense. Why would 401k plan administrators want to compete? They offer 401k plans as a benefit, not because they are making money off of them. Most companies would happily shut down their 401k plan and celebrate the savings of money and employee time related to 401k plans.

The companies selling the plan won't give 2 hoots either, they'll be too busy chasing after all these new idiots with tons of money in their IRA and no clue what they are doing.

Replacing 401k plans by carving out a similar amount of money in an IRA sounds great to those who know what they are doing or think they know what they are doing. However, it would ultimately reduce the odds of successful retirement for the majority of Americans unless there are a lot of other changes that go on at the same time to protect the sheep from the wolves.
Imagine if the government changed the rules such that whether or not you have a 401k at work, you are allowed to contribute to the 401k maximum (currently $18k) to an IRA instead. Also suppose that you can direct your employer to put a 401k match into an IRA instead.

Now because you can choose to have your IRA with any custodian you desire, there is no reason to contribute to your 401k if your 401k offers poor funds. Therefore, you would put your money in an IRA instead. Thereby putting pressure on 401k administrators to offer better funds, because they've suddenly lost clients.

Or how about making the capital gains taxes totally separate from income tax, with its own rate structure?  This would get rid of the baloney about having multiple accounts just for tax reasons...  I have 4 investment accounts (401K, tIRA, rIRA, after tax) and could easily have only one under a different system.  This would also solve the Mitt Romney IRA "problem." 

Chuck

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #29 on: February 25, 2015, 02:09:32 PM »
Why on earth would you keep money with someone who opposes a law that would make them act in your best interest?

Mostly, you have no choice.  A lot of these rip off options are through 401k plans.

I can't wait to hear all the asinine excuses that are going to be used to oppose this.  One I've already heard is that it will drastically limit the investors options.  Like somehow limiting choices to funds with non-ridiculous fees is a bad thing.
What's worse is how many people eat that up. I know that my employer would bite down on that bait hard.

infogoon

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #30 on: February 25, 2015, 02:57:23 PM »
Damn those jack-booted government socialist thugs interfering with free enterprise!  The rights of businesses to fleece the less sophisticated members of society is inherent in the constitution!  When will we dispense with  the nanny state and let free markets reign?

The free market would have handled this problem just as well, see if the stupid old people go broke they will not refer their friends to the bad brokerage houses and they will eventually go out of business.  See!  A free market solution!

I once had a coworker tell me, in all seriousness, that the FDA should be disbanded and that free market forces would be sufficient to make sure that over-the-counter medication remained both safe and efficacious. "Not to worry, once Brand X children's pain reliever kills a bunch of kids, people will just stop buying it! The system works!"

Indexer

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #31 on: February 25, 2015, 06:19:04 PM »
And even without allowing employer matches to go into an IRA, this would be a huge step in the right direction. It would (hopefully) put some pressure on 401k administrators to actually provide decent funds in 401ks.

That makes no sense. Why would 401k plan administrators want to compete? They offer 401k plans as a benefit, not because they are making money off of them. Most companies would happily shut down their 401k plan and celebrate the savings of money and employee time related to 401k plans.

The companies selling the plan won't give 2 hoots either, they'll be too busy chasing after all these new idiots with tons of money in their IRA and no clue what they are doing.

Replacing 401k plans by carving out a similar amount of money in an IRA sounds great to those who know what they are doing or think they know what they are doing. However, it would ultimately reduce the odds of successful retirement for the majority of Americans unless there are a lot of other changes that go on at the same time to protect the sheep from the wolves.

Companies want their 401k plans because valuable employees want 401ks, and 401ks are a tax deduction.  Pay an employee 60k a year, or pay them 50k with benefits and after tax deductions the benefits(401k/healthcare) are worth 10k to the employee but only cost you 7500.  Apply that logic to tens of thousands of employees.  Duh... you are going to do the 401k and healthcare.

Google has index funds in the sub 0.10% ER area.  Google has a butload of money and highly paid employees with boatloads of money in their 401ks, and Google had the reputation for awhile as being the 'best' place to work so just being their 401k provider carries some weight that the 401k provider must be the best 401k provider because Google wouldn't have it any other way.  Google can drive fund companies to offer prices near zero.

A small company with less than 100 employees can't do that.  They call up their local advisor who sets them up with a plan.  We aren't talking about Fidelity, Vanguard, Schwab.  We are talking about Ed Jones, insurance companies, banks, etc.  Sometimes you will see 'loads' and 12b1 fees in the plan.  That goes to the guy who sold it.  Hell Fidelity and Wells Fargo got sued by their own 'employees' for the 401k plans they were offering because they were administering their own 401ks and putting their own high cost funds in them.  The 'benefit' to the employees was a profit center for the company. 

The administrators(paychex is common) also make money setting up 401k plans and doing all the admin work.  Plus the advisors(middle men), and the fund companies have a chance to make boatloads. 

I do agree 401ks and especially 401ks with auto enrolment and automatic annual savings % increases with the funds going into a simple Target Date fund are having a huge impact on improving the retirement landscape.

Schaefer Light

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #32 on: February 26, 2015, 07:45:16 AM »
Its just more regulation, attempting to collect fines, and employing government officials instead of fixing the real problem:  Why is there preferential treatment for an employer sponsored plan?

Just let everyone contribute up to $17,500 in an IRA. 

Then an individual can choose how much to pay their investment adviser.
My thoughts exactly.  The government created the problem that they're now trying to solve.

Jacana

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #33 on: February 26, 2015, 09:23:29 AM »
Thanks for posting this! Glad to see something is being done. And thanks for reminding me, I actually have to go fill out some paperwork now for a lawsuit against a life insurance company that did exactly what this new law is trying to prevent: fleecing the elderly with false promises and hidden fees. As a beneficiary, apparently I'm eligible for the settlement if I can come up with tons of ridiculous, impossible to find information from >10 years ago from my great-aunt about her monthly expenses, income from all sources, medical expenses, etc. Yeah, right. I expect nothing from it, but I want to have my say.

My great-aunt sadly got completely screwed by a 'financial adviser' with no fiduciary responsibilities from her church, who constantly churned her retirement savings from one "great product" to another, chasing returns to get not only more fees from her but also great bonuses from the companies like the one in the lawsuit. We also know he falsified documents (we know because supposedly she signed some documents in NJ at a time when she was already sick with cancer, unable to drive herself, and absolutely did not go to NJ), and switched around stuff without her permission to make sure the church got the lion's share of her money when she passed. But we had no legal recourse, since it was our word against his. And when my mom tried to warn the church pastor about this man's unethical practices, the pastor got aggressively defensive and told my mom she was wrong, he was a wonderful man who had donated so much $ so selflessly and was an upstanding member of the church who was always ready to help others. Yeah, it's easy to donate other people's money.

People like that need to have way more legal oversight.

DoubleDown

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #34 on: February 26, 2015, 11:15:54 AM »
Damn those jack-booted government socialist thugs interfering with free enterprise!  The rights of businesses to fleece the less sophisticated members of society is inherent in the constitution!  When will we dispense with  the nanny state and let free markets reign?

The free market would have handled this problem just as well, see if the stupid old people go broke they will not refer their friends to the bad brokerage houses and they will eventually go out of business.  See!  A free market solution!

I once had a coworker tell me, in all seriousness, that the FDA should be disbanded and that free market forces would be sufficient to make sure that over-the-counter medication remained both safe and efficacious. "Not to worry, once Brand X children's pain reliever kills a bunch of kids, people will just stop buying it! The system works!"

Plus you can feel safe in the knowledge that Brand X (and every other brand) always acts in the best interests of society at large. Thanks Obama.

frugledoc

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #35 on: February 26, 2015, 11:41:16 AM »


You're free to invest in what you want, but I find it a bit of a ridiculous argument that $9 commissions for individual stocks are somehow a better deal in terms of fees than Vanguard index funds.

If you pay $9 per stock for each stock in the S&P 500, that will cost you $4,500. Then when you sell them it's another $4,500. By comparison, $9,000 is about what you would pay to invest $500k in Vanguard's S&P 500 index fund for 30 years. In return for their paltry 0.05% expense ratio, you get the ability to buy and sell part of your holdings and reinvest dividends without paying a $4,500 transaction fee.

I don't want 500 companies--most of them are shit.  I want 7.  My $1M+ portfolio cost about $150 to set up and nothing thereafter.  Dividend reinvestment is a no cost option until I choose to turn it off and FIRE.  A Vanguard fund, even at .05%, would cost $500 per year, and would increase with growth and reinvested dividends.

Before you extoll the virtue of diversification, let me explain that I really don't care about price movements.  In fact, I would prefer prices stay down while I reinvest in new shares every quarter.  I make more money that way.
[/quote]

You may do very well but your strategy is very high risk.  You should have at least 15 - 20 individual stocks.

MDM

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #36 on: February 26, 2015, 12:02:50 PM »
At first this proposal looked good.  From the WaPo article linked in the OP:
Quote
The new fiduciary standard should block what honest brokers call “over-managing:” unnecessary rollovers, churning (over-active buying and selling that generates brokers’ fees at the expense of returns), and the pushing of expensive and risky products like variable annuities.
Keeping seniors from being fleeced by variable annuity salesmen looks good to me.

But then there's this, from http://www.wsj.com/articles/obama-vs-savers-1424910441 (emphasis added):
Quote
...the President wants to require investors to use advisers who are even more heavily regulated.
...research cited by Team Obama suggests that those who invest in index funds that track the market generally do better than those who invest with a fund manager selecting particular stocks. We’ve run plenty of op-eds making that case. But it doesn’t mean we all should be forced to hire fiduciaries.  Such advisers often charge annual fees equalling 1% of a client’s assets.
I doubt many Mustachians would want to pay 1% to someone just to have that person say "invest in Vanguard."

As freznow and gimp (and maybe others) have noted, the lack of specificity in this proposal allows one to see pretty much whatever one wants to see. 

kib

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #37 on: February 26, 2015, 01:45:01 PM »
At first this proposal looked good.  From the WaPo article linked in the OP:
Quote
The new fiduciary standard should block what honest brokers call “over-managing:” unnecessary rollovers, churning (over-active buying and selling that generates brokers’ fees at the expense of returns), and the pushing of expensive and risky products like variable annuities.
Keeping seniors from being fleeced by variable annuity salesmen looks good to me.

But then there's this, from http://www.wsj.com/articles/obama-vs-savers-1424910441 (emphasis added):
Quote
...the President wants to require investors to use advisers who are even more heavily regulated.
...research cited by Team Obama suggests that those who invest in index funds that track the market generally do better than those who invest with a fund manager selecting particular stocks. We’ve run plenty of op-eds making that case. But it doesn’t mean we all should be forced to hire fiduciaries.  Such advisers often charge annual fees equalling 1% of a client’s assets.
I doubt many Mustachians would want to pay 1% to someone just to have that person say "invest in Vanguard."

As freznow and gimp (and maybe others) have noted, the lack of specificity in this proposal allows one to see pretty much whatever one wants to see.
Well that's disturbing, hopefully this part won't see the light of day.  Forced to use an adviser in order to make investments?  Mattress Savings & Loan, here I come.

johnny847

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Re: The White House proposes a new rule to help preserve retirement savings
« Reply #38 on: February 26, 2015, 01:48:33 PM »
At first this proposal looked good.  From the WaPo article linked in the OP:
Quote
The new fiduciary standard should block what honest brokers call “over-managing:” unnecessary rollovers, churning (over-active buying and selling that generates brokers’ fees at the expense of returns), and the pushing of expensive and risky products like variable annuities.
Keeping seniors from being fleeced by variable annuity salesmen looks good to me.

But then there's this, from http://www.wsj.com/articles/obama-vs-savers-1424910441 (emphasis added):
Quote
...the President wants to require investors to use advisers who are even more heavily regulated.
...research cited by Team Obama suggests that those who invest in index funds that track the market generally do better than those who invest with a fund manager selecting particular stocks. We’ve run plenty of op-eds making that case. But it doesn’t mean we all should be forced to hire fiduciaries.  Such advisers often charge annual fees equalling 1% of a client’s assets.
I doubt many Mustachians would want to pay 1% to someone just to have that person say "invest in Vanguard."

As freznow and gimp (and maybe others) have noted, the lack of specificity in this proposal allows one to see pretty much whatever one wants to see.
Well that's disturbing, hopefully this part won't see the light of day.  Forced to use an adviser in order to make investments?  Mattress Savings & Loan, here I come.
Looks like I need to become my own advisor.