How $17 Billion Annually Goes Into the Pockets of the Financial Industry and Not Investors

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What does $17 billion mean to you?

If you are an American investor, you should take note since this is your money.

If you are in the financial services industry, you should take note because it is the money you get from fees, expenses and rebates that unsuspecting investors pay you for managing their retirement and investing funds.

The flow of this $17 billion, and whether more of it goes into the accounts of individual investors and not financial professionals, is what is driving the move against financial reform by Republicans, the powerful financial services lobby and the Trump administration. As a matter of fact, it is the only reason.

“In essence, the financial services industry is more concerned about how the $17 billion in fees and expenses gets into their own pockets and not in the retirement security of their largely anonymous, unsophisticated and unknown clients.”

In Paul Krugman’s column of Feb. 6, 2017 called “Springtime for Scammers”  he wrote:

“Last week Mr. Trump released a memorandum calling on the Department of Labor to reconsider its new “fiduciary rule,” which requires financial advisers to act in their clients’ best interests — as opposed to, say, steering them into investments on which the advisers get big commissions. He also issued an executive order designed to weaken the Dodd-Frank financial reform, enacted in 2010 in the aftermath of the financial crisis.

“Both moves are very much in line with the priorities of congressional Republicans and, of course, the financial industry. For both groups really, really hate financial regulation, especially when it helps protect families against sharp practice.

“Why, after all, was the fiduciary rule created? The main issue here is retirement savings — the 401(k)’s and other plans that are Americans’ main source of retirement income over and above Social Security. To invest these funds, people have turned to financial professionals — but most probably weren’t aware that these professionals were under no legal obligation to give advice that maximized clients’ returns rather than their own incomes.”

The main reason why Trump and the financial services lobby hates financial reform and increasing investor protections is because a 2015 Obama administration study “concluded that “conflicted investment advice” has been reducing the return on retirement savings by around one percentage point, costing ordinary Americans around $17 billion each year.

And here is the most important reason: That $17 billion has been going into fees and rebates that became part , and only part, of the large salaries paid to financial salespeople, mutual fund wholesalers, financial executives, investment managers and people who have no interest at all in the financial well-being of their own customers.

The only concern about large segments of the financial services industry is about their own financial well-being and whether they can continue to generate fees and expenses that propel their large personal salaries.

In essence, the financial services industry is concerned about the well-being of their own retirements and not the retirement security of their largely anonymous and unknown clients.

So why do the Republicans and the Trump administration want this theft to continue? It’s simple: No one advocates for the financial and retirement security of average Americans.  And this will be a burden that will be borne by millions of Americans for decades into the future. 

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Chuck Epstein has managed marketing communications and public relations departments for major global financial institutions and participated in the launch of industry-changing financial products. He also has written by-lined articles for over 50 publications, five books and served as editor and publisher of nation’s first newsletter on the topic of using the PC for personal investing and trading. (“Investing Online, 1994-1999). He also is a marketing consultant, writer and speaker on topics related to investor protection and opportunities in the very dynamic cannabis industry. He has held senior-level marketing, PR and communications positions at the New York Futures Exchange, Chicago Mercantile Exchange, Lind-Waldock, Zacks Investment Research, Russell Investments and Principal Financial. He has won national awards from the Mutual Fund Education Alliance (MFEA) and his web site, www.mutualfundreform.com, was named best small blog in 2009 by the Society of American Business Editors and Writers (SABEW).

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