On Oct. 16, 2018, Republican Senate Majority leader Mitch McConnell said that due to an increase in the federal budget deficit, Republicans would have to reduce and alter some of the key provisions in Social Security and Medicare. In his announcement, McConnell said the only way to reduce the record-high federal deficit would be to cut entitlement programs like Medicare, Medicaid and Social Security.
“It’s disappointing, but it’s not a Republican problem,” McConnell said of the deficit, which grew 17% to $779 billion in fiscal year 2018.
This was an astounding announcement, especially as the nation approached the 2018 mid-term elections. Discussions about altering Social Security, privatizing it, raising the retirement age, or cutting benefit levels, have been done by Republicans since the Reagan administration, but articulating the need for a change raised the interest level among millions of people planning for retirement. This is because Social Security benefits represent about 33% of the income of the elderly.
Here was the reaction from Newsweek Magazine:
From the Los Angeles Times:
From the Washington Post:
McConnell says Medicare, Social Security causing ‘disturbing’ deficit increase
So when this historic announcement was made, I asked 20 of the nation’s largest investment firms, with a combined total AUM of over $14 trillion, and all of which have significant retirement planning operations, this straightforward question:
During the week of October 16, Senate Majority Leader Mitch McConnell said that reductions to Social Security benefits would be needed to reduce the budget deficit. I wanted to ask if your firm has any statement on this proposal to cut Social Security and what it would mean to retirement planning?
So what did the nation’s largest financial planning firms say in reaction to McConnell’s announcement? 
Nothing.
The nation’s largest financial planning and money management firms, which spend millions in ads proclaiming their interest in building a secure financial future for retirees, did not say a word about this historic revelation.
Now, there are some great reasons why the media relations departments did not want to respond to this simple inquiry. First, I am a small web site, so these huge firms don’t have to respond. That’s understandable. Second, McConnell’s announcement raises very delicate policy questions. However, many of the firms I asked had media relations people that specialize in policy, community and retirement issues. So if Social Security is not a retirement issues, these media relations people are being paid to do very little.
One of the few people who responded said their firm does not comment on “hypothetical” events, such as McConnell’s proposed alterations to Social Security. When I noted that the investment industry comments every day on how market movements affect future prices and all things related to strategies and portfolios, it is all based on hypothetical future scenarios. But when it comes to actual videotaped statements made by the Congressional leader of Republican Party about Social Security, a program that covers some 63 million people, everything became hypothetical and too ephemeral for comment.
Now, we are dealing with some of the smartest and most highly-paid people in any industry, so when the media people at the huge investment companies evade any discussion about the elephant in the room—Social Security–there must be a reason. My bet is that the investment industry wants all, or any part, of the $2.89 trillion in the Social Security trust fund, as well as future revenue streams, so they can put it under their umbrella of assets under management and then sell over-priced investment products to the masses.
Why Are Large Investment Firms Silent on Social Security Changes?
The reason is simple: these firms will be the main beneficiaries if the master plans to privatize Social Security or reduce its enrollment numbers are enacted by a Republican-dominated Congress. And even better, the long fought battle by the financial services and insurance industries to dilute the U.S Department of Labor’s fiduciary standard (the rule that a financial advisor has to act in the best interests of their own clients, makes more sense when it is paired with changes in the way Social Security coverage is decreased and those contributions are diverted to private investment firms.
That is the one-two punch for average investors. And when the two moves are combined—changing the way worker retirement contributions are collected and invested by financial firms, and then sold in an environment that allows conflicts-of-interest and overpriced products to be sold to unsophisticated investors–the whole scenario makes much more sense.
Let’s face it: there are not many investor markets left in the world to conquer that have this much money. China is vast, but poor. Europe is a mature market with few avenues left for market penetration. That leaves the average U.S investor as the last main flock of sheep to shear.
That is why the investment industry avoided any response to this historic announcement. They insist they are not political, but they are. They spend millions on lobbyists to defeat the fiduciary standard and quietly push for changes in Social Security. This is why they avoid discussing these issues. It is a plan best kept secret. It’s also a great example of a serious conflict-of-interest.
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