President Trump signed the order on Feb 3rd to review the Department of Labor change from 2016, which meant retirement investment advisors had to put the financial interests of their client ahead of their own.
This simple protection meant more certain investments for retirees and a stemming of the $17 billion lost each year to advisors who direct clients toward scheme which benefit the advisor more than the client.
Retiree Finances are Getting Tougher
The current generation of retirees have probably had it the best, but the future is uncertain for many, and the younger you get, the bleaker retirement options appear. An inability to retire at all will hit many, others will find themselves around 70, well, around Trump’s age, before they are allowed to retire and when they do, pension pots, mortgages, healthcare costs, and more will suck it out of them, probably forcing many into poverty and others into extended work.
Currently, making the right financial investments is a difficult path for many to negotiate. That’s just those who are able to. Most live hand to mouth, and are finding it increasingly difficult to save for a mortgage deposit, to even rent a liveable place, to put any kind of money in a pension, let alone invest or pay what essentials which are now seen as luxuries.
These include coverage against sudden death to cover burial fees, taxes, debts, inheritance and so on. The likely consequence of Trump’s executive order is a further erosion of people’s ability to save or provide for their retirement and eventual passing.
An Alternative Change to the Fiduciary Rule
In 2011, the SEC suggested the Department of Labor’s change, furthermore, Yale University’s Charles Ellis proposed this change as a way to help avert a looming pensions crisis. The entire focus was on retirees and their protection. As the No.1 voting block in the country, it makes sense, but it ignores the retirees of the future.
Even if Trump did a u-turn, the protection of retiree investments would not be much use to people investing at a younger age.
Instead, the rule should be expanded, as proposed by Barry Ritholtz in OnWallStreet, to cover all investment advise, period. This would offer a sensible layer of protection to investors – not on the markets, but just against those who seek to exploit their clients rather than help them.