WSJ: The Nanny Financial State- Labor strips workers of financial guidance.

[spursncowboys]

The Nanny Financial State
Labor strips workers of financial guidance.

With very little media or public attention, the Obama Administration recently suspended a Bush-era rule to let employees get financial guidance from the advisers managing their 401(k) investments. The provision was designed to give average investors access to the kind of personal financial advice that is typically a privilege of the wealthy. Instead, they are likely to get no guidance at all.

The saga began in 2006 when bipartisan reforms to the Employee Retirement Income Security Act opened the door to greater personal financial services directed to the average investor. In 2008, the Labor Department proposed a rule to let the financial advisers who handle a company's 401(k) programs also provide financial guidance to employees. This means such well-known firms as Fidelity or Vanguard. The new team at Labor has now killed the rule out of supposed concern for conflicts of interest.

The claim is that because the advisers who run 401(k) and other retirement programs work with mutual fund companies and brokerages to sell investment products, they can't be trusted to provide investors with impartial advice. According to California Democrat George Miller, the rule would have "opened the door to unscrupulous advisers to make recommendations based on their financial stake and not in the best interest of workers."

Labor says it will issue an alternative rule, but we've been down this road before. When the investment guidance was being considered, two proposals were in play. The Bush Administration's plan allowed a company to hire a fund manager, and for the fund manager to provide investment advice as part of a package deal for the firm's employees. The plan had the advantage of being cost effective and easily used, with any potential conflict mitigated by disclosure and other safeguards.

At the time, the anti-Wall Street brigade led by Iowa Senator Tom Harkin insisted that advisers would inevitably "hoodwink" consumers into bad investments. They proposed that if companies wished to provide investment advice to their workers they be required to hire independent advisers, whose suggestions would supposedly be pristine and trustworthy. The costs of these outsiders would also be paid by the employer. That might be affordable for huge corporations, but the additional costs are prohibitive to many smaller businesses, which means most workers will end up having to fend for themselves.

Mr. Harkin is now back at it, this time as a committee chairman who wants to codify the new Labor language into law. The current Congress has already demonstrated its disdain for markets, but stripping employees of basic financial advice betrays outright hostility to the concept of individuals managing their own retirement investments.

http://online.wsj.com/article/SB10001424052748704779704574554152990770372.html?m od=rss_opinion_main#printMode

[coyotes_geek]

People need to know about this stuff. Cutting off access to professional advice is a very bad move. Sure, there are concerns about impartiality. So just require all the advisors to disclose to people up front how they get compensated and explain any potential conflicts of interest up front. Explaining the potential bias up front and giving the advice is still the far better alternative to simply cutting people off from getting that advice.

And I don't even think that bias is all that great to begin with. I've used these advisors in the past and I've asked about how they get compensated. Every single one I've run across is on a salary that gets paid out of the costs my employer has to pay for administering the plan. None of them were on any kind of commission.

[George Gervin's Afro]

The Nanny Financial State
Labor strips workers of financial guidance.

With very little media or public attention, the Obama Administration recently suspended a Bush-era rule to let employees get financial guidance from the advisers managing their 401(k) investments. The provision was designed to give average investors access to the kind of personal financial advice that is typically a privilege of the wealthy. Instead, they are likely to get no guidance at all.

The saga began in 2006 when bipartisan reforms to the Employee Retirement Income Security Act opened the door to greater personal financial services directed to the average investor. In 2008, the Labor Department proposed a rule to let the financial advisers who handle a company's 401(k) programs also provide financial guidance to employees. This means such well-known firms as Fidelity or Vanguard. The new team at Labor has now killed the rule out of supposed concern for conflicts of interest.

The claim is that because the advisers who run 401(k) and other retirement programs work with mutual fund companies and brokerages to sell investment products, they can't be trusted to provide investors with impartial advice. According to California Democrat George Miller, the rule would have "opened the door to unscrupulous advisers to make recommendations based on their financial stake and not in the best interest of workers."

Labor says it will issue an alternative rule, but we've been down this road before. When the investment guidance was being considered, two proposals were in play. The Bush Administration's plan allowed a company to hire a fund manager, and for the fund manager to provide investment advice as part of a package deal for the firm's employees. The plan had the advantage of being cost effective and easily used, with any potential conflict mitigated by disclosure and other safeguards.

At the time, the anti-Wall Street brigade led by Iowa Senator Tom Harkin insisted that advisers would inevitably "hoodwink" consumers into bad investments. They proposed that if companies wished to provide investment advice to their workers they be required to hire independent advisers, whose suggestions would supposedly be pristine and trustworthy. The costs of these outsiders would also be paid by the employer. That might be affordable for huge corporations, but the additional costs are prohibitive to many smaller businesses, which means most workers will end up having to fend for themselves.

Mr. Harkin is now back at it, this time as a committee chairman who wants to codify the new Labor language into law. The current Congress has already demonstrated its disdain for markets, but stripping employees of basic financial advice betrays outright hostility to the concept of individuals managing their own retirement investments.

http://online.wsj.com/article/SB10001424052748704779704574554152990770372.html?m od=rss_opinion_main#printMode

Stripping employees of managing their own investments?:rolleyes

By the way, many of these companies pass along the costs to the employees. Second of all didn't you hear during the last few years of financial advisors on wall street selling bad investment advice so they could personally gain from the advice? do you think novice inverstors deserve some protection?

[boutons_deux]

"cutting off professional advice is a very bad move."

Having a fox nanny the hens would be a bad move.

[coyotes_geek]

"cutting off professional advice is a very bad move."

Having a fox nanny the hens would be a bad move.

Your alternative?

[George Gervin's Afro]

Your alternative?

pass a law that requires an idependent financial advisor...

[coyotes_geek]

pass a law that requires an idependent financial advisor...

Paid for by whom?

[George Gervin's Afro]

Paid for by whom?

each company shares the cost with their employees..i'm talking about a financial advisor figure as discussed in the article..do you need a graph?

[Winehole23]

each company shares the cost with their employees..i'm talking about a financial advisor figure as discussed in the articleIndependent, no; impartial, perhaps.

Requiring employees to pay for financial advice they might not want or need is a foreseeable problem here.

[coyotes_geek]

each company shares the cost with their employees..i'm talking about a financial advisor figure as discussed in the article..do you need a graph?

Back to behaving like a juvenile I see. Simple logic strikes again.

[coyotes_geek]

Independent, no; impartial, perhaps.

Requiring employees to pay for financial advice they might not want or need is a foreseeable problem here.

That's one problem. Another problem is that even if a company did want to hire someone independent no one except the Vanguards and the Fidelitys are going to have the manpower to provide on call financial advisor services for companies with tens of thousands, if not hundreds of thousands of employees.

[George Gervin's Afro]

Independent, no; impartial, perhaps.

Requiring employees to pay for financial advice they might not want or need is a foreseeable problem here.

that's to bad. it's part of the agreement and since your already paying for it the investment advisor can direct your investments. if you want to opt out on the advice then so be i but you are still members of the company's plan so you're still paying

[George Gervin's Afro]

That's one problem. Another problem is that even if a company did want to hire someone independent no one except the Vanguards and the Fidelitys are going to have the manpower to provide on call financial advisor services for companies with tens of thousands, if not hundreds of thousands of employees.

there are many investment companies who have automated investment engines

[Winehole23]

Would you agree then that your solution doesn't really solve the conflict of interest aimed at by suspending the financial advice, but merely rejiggers the cost in a manner calculated to appeal to your own idiosyncratic sense of the equities?

[Winehole23]

there are many investment companies who have automated investment enginesThis relates to financial advice how, please?

[coyotes_geek]

there are many investment companies who have automated investment engines

I sure hope that's not some kind of investment product that an allegedly independent financial advisor might try to sell to someone.

[George Gervin's Afro]

I sure hope that's not some kind of investment product that an allegedly independent financial advisor might try to sell to someone.

Our company provides ,not only our clients, it's the employees an automated investment service. Since these systems aren't sold by independant financial advisors there is no worry.

[George Gervin's Afro]

This relates to financial advice how, please?

This allows them to choose products/ funds that relate to their investmnet objectives. Our system offers a set of options from various funds. The system lists the funds that meet the invetment criteria of the individual.

Anything else you need clarified?

[coyotes_geek]

Our company provides ,not only our clients, it's the employees an automated investment service. Since these systems aren't sold by independant financial advisors there is no worry.

So in other words it has no relevance to a discussion on where people can get financial advice. Thanks for sharing.

[George Gervin's Afro]

So in other words it has no relevance to a discussion on where people can get financial advice. Thanks for sharing.

Ok, it's obvious that you're not a very smart person. They get their financial advice and list the fixed number of prducts or funds that are available in the plan. They have an idependant advisor that provides them investment information they need in order to pick a product of fund to invest in.

Are you stupid?

[George Gervin's Afro]

Not only does the system provide investment information it also provides a way to hel-p you allocate your contributions. Do you want 33% to be aggressive? If so these are your choices..you want to be conervative with 33% then here are your choices... comprende?

[coyotes_geek]

Ok, it's obvious that you're not a very smart person. They get their financial advice and list the fixed number of prducts or funds that are available in the plan. They have an idependant advisor that provides them investment information they need in order to pick a product of fund to invest in.

Are you stupid?

So in other words, it's no different than what is going on now. A employee of a firm gives people advice as to which of that firm's products would be best for them. I'm glad that you agree with me that the Obama administration is wrong to try and prohibit consumers from getting advice from people who have products to sell.

[George Gervin's Afro]

So in other words, it's no different than what is going on now. A employee of a firm gives people advice as to which of that firm's products would be best for them. I'm glad that you agree with me that the Obama administration is wrong to try and prohibit consumers from getting advice from people who have products to sell.

It's not an employee you moron! It's an automated system... how hard is that for you to understand?

The employees have an independant advisor (our system) who provides fund and product information. It is a third party company with no vested interest in any of the funds.. Wake up man!

What your trying to explain is that it's ok for fund company a to provide 'objective' advice when their firm also has products available for the employees to choose.... conflict of interest.. so I agree with what the administration is trying to do.

[coyotes_geek]

Again with the insults. Get back to me when you feel you're capable of behaving like a grown up and I will gladly continue the discussion over whether or not "independent advisors" and "automated systems" guiding people towards certain investment products is any different than what we have now.

[Winehole23]

It seems to perturb GGA that anything should have to be discussed on a discussion board. He also seems to resent others for seeing things differently than him.

The instantaneous resort to insult is a tell, but making agreement with him the criterion of intelligence is an even more basic sign of immaturity IMO.

[George Gervin's Afro]

It seems to perturb GGA that anything should have to be discussed on a discussion board. He also seems to resent others for seeing things differently than him.

The instantaneous resort to insult is a tell, but making agreement with him the criterion of intelligence is an even more basic sign of immaturity IMO.

wow that was deep man..

[Winehole23]

You call people idiots for merely disagreeing or otherwise not reading your mind, when your posts are sometimes less than completely clear. How would you describe that?

[Aggie Hoopsfan]

pass a law that requires an idependent financial advisor...

Awesome, another law requiring me to do something with my own money.

You're definitely a sorry nanny stater lib, but at least you're consistent...

[ElNono]

I don't necessarily disagree with this. Anything that pushes people to educate themselves on finance and how to manage their money is a good thing. The average Joe that doesn't really understands investments and thus blindly follows an advisor shouldn't be in the investment market anyways.

[Winehole23]

The average Joe that doesn't really understands investments and thus blindly follows an advisor shouldn't be in the investment market anyways.Used to be called due diligence, i.e., checking for yourself, getting second-, third- and even fourth-opinions and generally educating yourself about what you invest in.

I think it used to be commonplace, but I could be wrong about that.

[ElNono]

Used to be called due diligence, i.e., checking for yourself, getting second-, third- and even fourth-opinions and generally educating yourself about what you invest in.

Yes, but it has gotten to the point where people are too lazy to do their homework, and the market has been sold by these same investment firms as the panacea that keeps on giving. So even average joe wants to be in on it, even though they know jackshit about it. They only find out when their investments went down the drain.

[coyotes_geek]

I don't necessarily disagree with this. Anything that pushes people to educate themselves on finance and how to manage their money is a good thing. The average Joe that doesn't really understands investments and thus blindly follows an advisor shouldn't be in the investment market anyways.

People do need to educate themselves. But the government stepping in and telling people who they can and can't get advice from doesn't do anything in that regards.

[ElNono]

People do need to educate themselves. But the government stepping in and telling people who they can and can't get advice from doesn't do anything in that regards.

Actually, the government is simply telling them who they cannot get advice from. There's plenty of financial advisors out there, including none if you know what you're doing.

[coyotes_geek]

Actually, the government is simply telling them who they cannot get advice from. There's plenty of financial advisors out there, including none if you know what you're doing.

So you think people come out ahead by the government restricting their options? There are plenty of financial advisors out there and none of them work for free. All of them have a financial stake in this somehow. Why is it only the guy who works for the company administering my employer's 401k plan who can't be trusted to give me advice? But it would be okay for that same guy to give you advice. That just makes no sense.

[ElNono]

So you think people come out ahead by the government restricting their options? There are plenty of financial advisors out there and none of them work for free. All of them have a financial stake in this somehow. Why is it only the guy who works for the company administering my employer's 401k plan who can't be trusted to give me advice? But it would be okay for that same guy to give you advice. That just makes no sense.

It's not a matter of trust. It's a matter of conflict of interest because a lot of this stuff is part of a company's package that engulfs a lot of people that know absolutely nothing about investing. This forces people to actually seek out advice and inform themselves of before they go tossing their money away.

[spursncowboys]

The best financial adviser is Benjamin Graham. Safest too.

[RandomGuy]

The Nanny Financial State
Labor strips workers of financial guidance.

With very little media or public attention, the Obama Administration recently suspended a Bush-era rule to let employees get financial guidance from the advisers managing their 401(k) investments. The provision was designed to give average investors access to the kind of personal financial advice that is typically a privilege of the wealthy. Instead, they are likely to get no guidance at all.

The saga began in 2006 when bipartisan reforms to the Employee Retirement Income Security Act opened the door to greater personal financial services directed to the average investor. In 2008, the Labor Department proposed a rule to let the financial advisers who handle a company's 401(k) programs also provide financial guidance to employees. This means such well-known firms as Fidelity or Vanguard. The new team at Labor has now killed the rule out of supposed concern for conflicts of interest.

The claim is that because the advisers who run 401(k) and other retirement programs work with mutual fund companies and brokerages to sell investment products, they can't be trusted to provide investors with impartial advice. According to California Democrat George Miller, the rule would have "opened the door to unscrupulous advisers to make recommendations based on their financial stake and not in the best interest of workers."

Labor says it will issue an alternative rule, but we've been down this road before. When the investment guidance was being considered, two proposals were in play. The Bush Administration's plan allowed a company to hire a fund manager, and for the fund manager to provide investment advice as part of a package deal for the firm's employees. The plan had the advantage of being cost effective and easily used, with any potential conflict mitigated by disclosure and other safeguards.

At the time, the anti-Wall Street brigade led by Iowa Senator Tom Harkin insisted that advisers would inevitably "hoodwink" consumers into bad investments. They proposed that if companies wished to provide investment advice to their workers they be required to hire independent advisers, whose suggestions would supposedly be pristine and trustworthy. The costs of these outsiders would also be paid by the employer. That might be affordable for huge corporations, but the additional costs are prohibitive to many smaller businesses, which means most workers will end up having to fend for themselves.

Mr. Harkin is now back at it, this time as a committee chairman who wants to codify the new Labor language into law. The current Congress has already demonstrated its disdain for markets, but stripping employees of basic financial advice betrays outright hostility to the concept of individuals managing their own retirement investments.

http://online.wsj.com/article/SB10001424052748704779704574554152990770372.html?m od=rss_opinion_main#printMode

Interesting peice.

Let's put on our critical thinking hats.

I will start by highlighting a certain part of the URL that you might not see.

"...=rss_opinion_main#printMode"

I will then continue by asking the thread starter a fair critical thinking question:

Do you think you got a balanced and complete version of this event, with all the context necessary to make an informed opinion as to whether this event was positive or negative?

[coyotes_geek]

It's not a matter of trust. It's a matter of conflict of interest because a lot of this stuff is part of a company's package that engulfs a lot of people that know absolutely nothing about investing. This forces people to actually seek out advice and inform themselves of before they go tossing their money away.

People are already seeking out advice for themselves when they decide to pick up the phone and ask someone a question. Whether or not the person on the other end of the line works for the same company that administers their 401k doesn't change that. This conflict of interest discussion is a completely separate issue from people deciding to educate themselves. Someone who doesn't give a crap about educating themselves isn't calling anyone to begin with so the government stepping in to prevent them from being able to ask their 401k provider for advice does nothing to help them. All this does is hurt people who are trying to educate themselves by reducing their options.

[ElNono]

People are already seeking out advice for themselves when they decide to pick up the phone and ask someone a question.

And that is not what this is about. This is about the packages that financial firms offer to companies that include all-inclusive tiered investment packages for their employee's 401(k), and the advice they provide on those packages.

Here's a more detailed article on what's this about:
http://www.hrnewsnow.com/?p=535

And here's also the proposed law that's making it's way through Congress to address this:
http://www.govtrack.us/congress/billtext.xpd?bill=h111-1988

[coyotes_geek]

Looks like we're at the point of agree to disagree. I just don't think there's an issue here so long as conflicts of interest are disclosed up front. Conflicts of interest are everywhere and I didn't see anything in that bill that will completely remove COI's from the equation. All it does is trade one source of COI for another source of COI while making government the overseer of how people are allowed to get their financial advice.

[George Gervin's Afro]

Awesome, another law requiring me to do something with my own money.

You're definitely a sorry nanny stater lib, but at least you're consistent...

You're right..we all know people weren't ripped off using financial investment advice that hurt them but helped the financial advisor.. never happens. :rolleyes


I guess I should try and get where your coming from. Are you stating that there are no conflict of interests when receiving financial advice? Shouldn't the investor know this? If they should know this and the financial advisor is not mandated by law to say anything then what? How is the financial advisor penalized when they lose all of your money? They may go to jail but your still out of luck...so are you ok with people getting ripped off?


I guess you know that the law does nothing to your ability to invest money don't you? I think you do but you;d rather be intellectually dishonest about it... no big deal

[George Gervin's Afro]

Looks like we're at the point of agree to disagree. I just don't think there's an issue here so long as conflicts of interest are disclosed up front. Conflicts of interest are everywhere and I didn't see anything in that bill that will completely remove COI's from the equation. All it does is trade one source of COI for another source of COI while making government the overseer of how people are allowed to get their financial advice.

Actually it would remove almost all chances of the possibility of conflicts of interests.