Donald Trump’s Executive Order Will Let Private Equity Funds Drain Your 401(k)

[boutons_deux]

DONALD TRUMP’S FEBRUARY 3 executive order (https://www.whitehouse.gov/the-press-office/2017/02/03/presidential-memorandum-fiduciary-duty-rule) enabling financial advisers to continue ripping off their clients could prove a lifeline for a surprising beneficiary: the private equity industry.

The Obama White House estimated in a 2015 report (https://obamawhitehouse.archives.gov/the-press-office/2016/04/06/fact-sheet-middle-class-economics-strengthening-retirement-security) that conflicts of interest cost retirement savers $17 billion annually, though that figure has been challenged (http://www.forbes.com/sites/realspin/2015/12/16/an-inflated-17-billion-talking-point-from-the-dol/#2f5a2c5a39e1).

And to break into the 401(k) market – especially with financial products that are high-risk, high-cost, and often make their money from ripping established companies apart and selling the pieces –

private equity funds would need a lot of help from the advisers who guide ordinary investors in the process. And that would require the ability to offer those advisers considerable perks and kickbacks.

On the same day that he issued his fiduciary rule executive order, Trump met with his White House jobs panel (http://www.cnbc.com/2017/02/03/trump-says-he-will-address-dodd-frank-and-the-banking-industry-with-ceo-council.html), headed by Steven Schwarzman, CEO of the world’s largest private equity firm, Blackstone.

“We’re getting rid of your regulations,” Trump told Schwarzman (https://www.whitehouse.gov/the-press-office/2017/02/03/remarks-president-trump-strategy-and-policy-forum) and his colleagues on Friday.

Late last month,

Schwarzman stressed his craving for Blackstone to get into the 401(k) market. “In life you have to have a dream,” Schwarzman said on an analyst call (http://s1.q4cdn.com/641657634/files/doc_financials/2016/q4/Q4-FY-2016-Investor-Call-Transcript.pdf), “and one of our dreams is our desire and the market’s need to have more access at retail to alternative asset products.”

private equity wants to crack the 401(k) market to unlock trillions of dollars in potential capital.

Americans hold $6.8 trillion (https://401kspecialistmag.com/401k-plans-reach-4-7-trillion-in-total-assets/) in individual retirement plans like 401(k)s. The Wall Street Journal (http://blogs.wsj.com/moneybeat/2017/02/01/private-equity-tries-to-crack-the-401k-market-again/?emailToken=JRrzcf1zYnqQitYyaMwW8BgNRINNVrDUHA4=) describes this as “something of a Holy Grail quest” for the industry.

Large firms like Carlyle, Blackstone, Partners Group, and Kohlberg Kravitz Roberts (KKR) have developed a series of 401(k)-friendly products (http://www.institutionalinvestor.com/article/3520417/investors-pensions/pension-fight-private-equity-aims-for-defined-contribution-market.html#/.WJYRKhQydUR) over the past couple years (https://dealbook.nytimes.com/2014/10/20/private-equity-titans-open-cloistered-world-to-smaller-investors/?_r=0).

If plan advisers take this up, it would flood more money into private equity. “Five percent of the estimated $6.8 trillion and growing in 401(k)s is $340 billion – a nice chunk of change,”

these investments are far riskier than most 401(k) offerings. Contrary to popular belief,

private equity firms do not outperform the market (http://www.nakedcapitalism.com/2016/07/why-private-equity-does-not-outperform.html).

Fees are also often opaque and much larger than those in passive funds, usually extracting 1-2 percent of the total capital invested and 20 percent of the profits.

A 2014 SEC study (https://newrepublic.com/article/117735/private-equity-fraud-how-firms-are-ripping-their-investors) found that

over half of the private equity firms examined shifted costs to benefit themselves,

like billing investors for legal and compliance costs without their knowledge, or

forcing investors to pay for “consultants” who are actually former employees of the companies.

Giant fees guarantee private equity profits regardless of the performance of their portfolio.

According to a Harvard Law School study (http://poseidon01.ssrn.com/delivery.php?ID=2660820640820240270950231000830070 00101015002033002030090083117006070094106067016007 02902601701004710202112611100201607610800410408203 00640060640950241210741090760620020331261130900211 25088008103091116103090005123077075117003090093092 024098009026126&EXT=pdf) last October,

plan advisers routinely present limited choices to 401(k) investors, to steer them into unnecessary or risky options.

This favoritism benefits affiliated funds, and with private equity perks in the waiting, advisers would have yet another incentive to tout their products.

https://theintercept.com/2017/02/06/donald-trumps-executive-order-will-let-private-equity-funds-drain-your-401k/

Another way America is fucked and unfuckable

[Thread]

Yeah, yeah, yeah, 401 funds, Hitler, Nazis, Fascists, racist,,,yeah, yeah, yeah.

[Joseph Kony]

^shining example of why trump fellators are retarded

hurr durr who cares about how this affects me at least he speaks his mind hurr durr

[Thread]

^shining example of why trump fellators are retarded

hurr durr who cares about how this affects me at least he speaks his mind hurr durr

Yeah, yeah, yeah, Hitler, 401, billionaires, Nazi's, Fascists, racists, retards, Putin, Hitler, and Nazi's again,,,yeah, yeah, yeah.

[Joseph Kony]

except the topic wasnt about nazis or hitler or fascists

[Thread]

except the topic wasnt about nazis or hitler or fascists

And don't hide by posting under me without quoting me. That's chickenshit, JK.

Uh, you Nazi, you.

[SnakeBoy]

^shining example of why trump fellators are retarded

hurr durr who cares about how this affects me at least he speaks his mind hurr durr

How would it affect you?

[Joseph Kony]

because i have a 401k :rolleyes

[Thread]

because i have a 401k retard :rolleyes

My ass. You have change jar on your clothes dresser.

[Joseph Kony]

My ass. You have change jar on your clothes dresser.just because your poor mayo loving ass entire net worth is based on his collection of change you found beneath the couch doesnt mean other people dont have money invested in their 401k

[Thread]

just because your poor mayo loving ass entire net worth is based on his collection of change you found beneath the couch doesnt mean other people dont have money invested in their 401k

Ironically that is exactly what it means. Now, go stand on the off ramp of the nearest freeway.

[CosmicCowboy]

Boo acts like people are going to be forced to put their 401ks into risky investments.

[SnakeBoy]

because i have a 401k :rolleyes

So you're going to move your 401k money into riskier investments because of this?

[Joseph Kony]

lol i love how you chumps always find some way to spin it...

"mexico is paying for the wall!" ...."ok well i guess we are but i dont mind since illegals cost us money anyway!"
"trump's gonna help the working class guy!" ..."i dont mind that he appointed nothing but billionaires to fix the system that made them billionaires, he's gonna do right by me!"
"at least he's not meddling in international affairs!" ..."good job stepping in and butting into international affairs!"
"trump is gonna fix the econmy!" ..."i dont mind paying extra for imported goods not like i needed that money anyway!"

lol claiming climate change is made up by china. lol "alternative facts." lol getting asshurt and tweeting incessantly about "fake news" lol getting his shit pushed in by the courts, lol claiming NYT is losing subscribers but he's only giving them more. lol :cry muh crowd size :cry

:lmao you'll turn on him eventually.

[Thread]

:lmao you'll turn on him eventually.

- "No sir, you couldn't drag me away."

- "Sgt. Al Powell" - "Die Hard"

[Winehole23]

can someone explain how it is a bad idea to require retirement counselors to sit on the same side of the table as their (relatively unsophistcated) clients when they buy compicated financial products?

[Chris]

Fake news

[CosmicCowboy]

can someone explain how it is a bad idea to require retirement counselors to sit on the same side of the table as their (relatively unsophistcated) clients when they buy compicated financial products?

Do you think the lowest fee fund is always the best investment?

[Th'Pusher]

Do you think the lowest fee fund is always the best investment?

No. But the point is that the person advising you should not be in a position to recommend investments that he otherwise wouldn't if not for the incentives.

[Th'Pusher]

Fake news
Do trumpettes reflexively say this when the don't understand the subject matter? Or do you understand it but don't like it? There is nothing fake about it.

[Joseph Kony]

Do trumpettes reflexively say this when the don't understand the subject matter? Or do you understand it but don't like it? There is nothing fake about it.

http://i.dailymail.co.uk/i/pix/2008/05_04/035ostrich_468x538.jpg

[spurraider21]

politically inconvenient news

[Thread]

Fake news

[in2deep]

:lmao thinking that the financial companies were not draining our 401ks before Trump :lol

[boutons_deux]

:lmao thinking that the financial companies were not draining our 401ks before Trump :lol

p/e hasn't been in the retiail investment business, dumbfuck

[DMC]

lol i love how you chumps always find some way to spin it...

"mexico is paying for the wall!" ...."ok well i guess we are but i dont mind since illegals cost us money anyway!"
"trump's gonna help the working class guy!" ..."i dont mind that he appointed nothing but billionaires to fix the system that made them billionaires, he's gonna do right by me!"
"at least he's not meddling in international affairs!" ..."good job stepping in and butting into international affairs!"
"trump is gonna fix the econmy!" ..."i dont mind paying extra for imported goods not like i needed that money anyway!"

lol claiming climate change is made up by china. lol "alternative facts." lol getting asshurt and tweeting incessantly about "fake news" lol getting his shit pushed in by the courts, lol claiming NYT is losing subscribers but he's only giving them more. lol :cry muh crowd size :cry

:lmao you'll turn on him eventually.

So you own your own business? If you work for a corporation, some billionaire is likely why you have a job. You should hope your 401K gets taken. Wealthy people are evil.

[DMC]

No. But the point is that the person advising you should not be in a position to recommend investments that he otherwise wouldn't if not for the incentives.

Never get a personal trainer, a real estate broker or car salesman. Those incentives will get you.

Some of you folks act like you're still inside the fucking womb.

[CosmicCowboy]

No. But the point is that the person advising you should not be in a position to recommend investments that he otherwise wouldn't if not for the incentives.

I recognize there were abuses but the draconian overreaction basically put everyone in index funds.

[Th'Pusher]

Never get a personal trainer, a real estate broker or car salesman. Those incentives will get you.

Some of you folks act like you're still inside the fucking womb.

More bad analogies. You're making a career out of shitty logic.

[Th'Pusher]

I recognize there were abuses but the draconian overreaction basically put everyone in index funds.

Ensuring financial advisors act in their client's best interest and avoid conflicts of interest is draconian? And suggesting index funds would be financial advisors only option is ridiculous.

[SnakeBoy]

can someone explain how it is a bad idea to require retirement counselors to sit on the same side of the table as their (relatively unsophistcated) clients when they buy compicated financial products?

Did Dodd Frank require them to do that?

[Wild Cobra]

The fake news will never end as long as the libtards are butt-hurt.

That will be at least 8 years!

The more they create fake news, the more they harm the liberal causes.

Bye-bye liberal rule for some time!

[pgardn]

The fake news will never end as long as I am in triangulation mode for womenfolk.

That will be at least 8 years!

[boutons_deux]

The fake news will never end as long as the libtards are butt-hurt.

That will be at least 8 years!

The more they create fake news, the more they harm the liberal causes.

Bye-bye liberal rule for some time!

There's no fake news in this thread, only bullshit and lies from you rightwingnut motherfuckers.

[Winehole23]

Did Dodd Frank require them to do that?Trump's EO also takes a swipe at the fiduciary rule.

[Winehole23]

Do you think the lowest fee fund is always the best investment?Not stipulated, not subscribed to.

What's the problem with the rule requiring financial advisors to put their clients before themselves?

[boutons_deux]

just because your poor mayo loving ass entire net worth is based on his collection of change you found beneath the couch doesnt mean other people dont have money invested in their 401k

mayo? I learned about that cultural angle in the movie "Undercover Bruvva". U/B eating mayo on white bread? hilarious.

[SnakeBoy]

Trump's EO also takes a swipe at the fiduciary rule.

I did not know that.



What's the problem with the rule requiring financial advisors to put their clients before themselves?

I agree with the idea of the fiduciary rule but there certainly will be problems with it. Like the ACA we have to pass it to find out what the problems are. Some think it will cost investors more as advisors move to fee based service instead of commissions. I don't know if that's true but I think it will always be true that financial advisors will always need to make money and uneducated investors will always have their asses handed to them.

[UNT Eagles 2016]

I never waste my money on accounts that I'll never see unless I live to a decrepit and miserable old age. That's horse manure.

[clambake]

you are very wise.

[Chucho]

It's like people HATE when the Government rolls back ANYTHING that makes citizens responsible for their own choices, and moreover in recent times, ANYTHING

[Chucho]

[QUOTE=Chucho;8895882]It's like people HATE when the Government rolls back ANYTHING that makes citizens responsible for their own choices, and moreover in recent times, ANYTHING that requires citizen's to make a choice beyond ignorant partisanship.

If your retirement vehicle is continuously shaky and you have not much power to change that stability in a Group 401k, you're an idiot. Blind confidence in the market is Fool's Gold.

[CosmicCowboy]

Not stipulated, not subscribed to.

What's the problem with the rule requiring financial advisors to put their clients before themselves?

I expect advisors to do that. There is competitition among advisors just like any other business. The question is how do you legislate that? What if a advisor offers me a high fee investment with the potential for a high return that I buy but it doesn't work out? Is it his responsibility that I lost money?

[Th'Pusher]

I expect advisors to do that. There is competitition among advisors just like any other business. The question is how do you legislate that? What if a advisor offers me a high fee investment with the potential for a high return that I buy but it doesn't work out? Is it his responsibility that I lost money?

No. You can put you money in any vehicle you want. This regulation required financial advisors a fiduciary responsibility to their clients, to be transparent with their fee structures and avoid conflicts of interest where possible.

[Winehole23]

An unbearable restriction of business. The business plan apparently requires a free hand to screw the customer.

[Winehole23]

Tell me Trumpistas, how does rescinding the fiduciary rule help forgotten Americans trying to save for retirement?

[Winehole23]

over the last twelve years, private equity managers on average failed to outperform an S&P tracker fund:


US private equity managers have extracted $400bn in fees and expenses from investors since 2006 but on average they failed to beat the returns from an S&P 500 tracker fund, according to a new analysis.https://www.ft.com/content/02669416-964e-11e8-b747-fb1e803ee64e (paywall)

[Winehole23]

bypass paywalls:

https://www.techtimes.com/articles/38718/20150310/7-ways-to-get-around-the-paywalls-of-wall-street-journal-new-york-times-and-more.htm
https://chrome.google.com/webstore/detail/no-paywall/melpfimolgpcimcfkkimbgnapkpojggc?hl=en-US

[Winehole23]

Study suggests the Obama fiduciary rule was working well until Trump rescinded it for his Wall St. buddies.

Profits before people.


The new study (https://www.nber.org/papers/w27577) by Harvard and New York University researchers examined sales of variable annuities, which regulators (https://www.thinkadvisor.com/2014/07/28/variable-annuities-a-top-source-of-customer-compla/) have said are among the investments that receive the most consumer complaints. The researchers looked at whether the market for those products changed after the rule began moving forward and the industry began taking steps to deal with it.

Here are the three key finding from the report, which was published by the National Bureau of Economic Research:

1. Wall Street conflicts of interest are real: “While investor incentives matter, broker incentives play a more important role in determining sales. Moreover, brokers’ incentives conflict with their clients’: Brokers earn higher commissions for selling inferior annuities that have higher expenses, as well as fewer and worse-performing investment options... brokerage firms that sell higher-expense products have higher rates of customer complaints and regulatory offenses.

2. Conflicts of interest steer customers into sketchier investments: “Variable annuities have been criticized for having high expenses and are the commonly cited financial product in brokerage customer complaints... A one standard deviation increase in brokerage commissions is associated with a 17 percent increase in variable annuities.”

2. The fiduciary rule was actually working to stop this: “Survey evidence indicates that brokers and insurers started complying with the fiduciary rule during this proposal and implementation period...The rule helped reduce conflicts of interest. In response to the rule, annuity sales flows became twice as sensitive to expenses and the sale of high-expense annuities fell by 52 percent. Moreover, the relative availability of high-expense products declined following the rule... the proposed rule change increased the risk-adjusted returns of investors by up to 86 basis points (bps) per annum.”

So, to reiterate: Wall Street is plagued by hidden conflicts of interest that end up misleading customers into investments that are good for Wall Street but bad for the customers -- and a new rule actually began to fix the problem.
https://sirota.substack.com/p/obamas-wall-street-rule-was-working

[boutons_deux]

Study suggests the Obama fiduciary rule was working well until Trump rescinded it for his Wall St. buddies.

Profits before people.

https://sirota.substack.com/p/obamas-wall-street-rule-was-working


Will the Dems restore the rule?

[Winehole23]

Will the Dems restore the rule?Dunno. I tend to doubt it.

[boutons_deux]

BigFinance is totally corrupt, is untouchable (see Obama + Holder), making money with money, nothing productive outside of their own wealth, destroying companies and lives (eg, p/e predators), making money esp with Other People's money.

America is fucked and unfuckable.

[ElNono]

Study suggests the Obama fiduciary rule was working well until Trump rescinded it for his Wall St. buddies.

Profits before people.

https://sirota.substack.com/p/obamas-wall-street-rule-was-working

Remember this? Check the end of the video....

https://www.nbcnews.com/video/trump-on-taxes-my-hedge-fund-friends-dont-pay-fair-share-515442755976

[Winehole23]

Remember this? Check the end of the video....

https://www.nbcnews.com/video/trump-on-taxes-my-hedge-fund-friends-dont-pay-fair-share-515442755976Not gonna lie, at the time I thought he might be telling the truth.

Trump's voice is so clear in this video and he seems almost, uh, grossly intact mentally. Striking contrast with five years later.

[ElNono]

Not gonna lie, at the time I thought he might be telling the truth.

Trump's voice is so clear in this video and he seems almost, uh, grossly intact mentally. Striking contrast with five years later.

So did a number of voters... the magical thinking is over though...