Consumer Groups Vow to Continue Fighting for Fiduciary Rule

Their “Retirement Ripoff Counter” shows that without the protections of the fiduciary rule, investors are losing $1.9 million an hour, $46 million a day—and $17 billion a year.

Consumer finance protection groups, including The Committee for a Fiduciary Standard and the Americans for Financial Reform, held a press conference Wednesday, vowing to fight for the fiduciary rule and to draw attention to its benefits for working Americans.

One of the ways they plan on generating publicity is by showing the cost to Americans for not being protected by the rule as a “Retirement Ripoff Counter.” Staring Wednesday evening, the groups will project the counter on the sides of several major Washington, D.C., landmarks—and will bring it to other major cities in the country, as well. The counter shows that without the rule protecting the interests of American investors, they are losing $1.9 million an hour, $46 million a day—and $17 billion a year.

“With Republicans in control of the White House, the Senate and the House of Representatives, consumer protection is under siege,” said Senator Elizabeth Warren (D-Massachusetts). “They want to ensure that the fiduciary rule does not go into effect. We want to ensure that financial advisers cannot cheat clients by putting their own interests ahead of theirs. This is big money we are talking about. The conflicts that exist today cost American families $17 billion a year.”

Warren called National Economic Council Director Gary Cohen’s recommendation that the Department of Labor (DOL) get a second opinion on the fiduciary rule “A sham. The Labor Department issued a 382-page analysis, more than 300,000 people have signed petitions in favor of the rule, and the DOL held four days of hearings on it,” she said. “This is a way for Donald Trump to make a $17 billion gift to Wall Street.” Just since February 3, when President Trump issued his memorandum telling the DOL to revisit the fiduciary rule, Americans have lost $2.9 billion to fees and commissions paid to unscrupulous advisers, she said.

Kathleen McBride, co-founder of The Committee for a Fiduciary Standard, said the impact of not having the fiduciary rule has serious consequences for retirement savers. “Two percent in extra commissions and fees can cut investors’ nest eggs in half. One percent strips out 28%,” McBride said. “The loopholes and conflicts of interest permit the systematic overcharging of investors.”

Micah Hauptman, financial services counsel at the Consumer Federation of America, said that the Retirement Ripoff Counter is based on the findings of the Council of Economic Advisers based on the sale of stocks and mutual funds—but that it does not include the more opaque areas of the market, such as Real Estate Investment Trusts (REITs) and annuities. If it did so, it would show that investors are losing far more than $17 billion a year, Hauptman said.

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The groups pledge to continue to work with, even to confront, the DOL to protect the fiduciary rule. “We are prepared to challenge whatever the new DOL decides to do, whether it guts, repeals or delays its decision,” said Stephen Hall, legal director and securities specialist at Better Markets. “We want [the DOL] to adhere to the spirit of the law just as vigorously as the industry did when it launched its relentless attacks on the rule.”

Americans Lack Knowledge in Financial Literacy

A survey found that 38% of Americans know nothing about compounding.

In starting off Financial Literacy Month, Stash, a digital investment advisor company, has released findings revealing common misunderstandings many Americans have on investing and finance.

Their first annual financial literacy survey, points out errors exemplifying the lack of knowledge that many have regarding financial literacy. The survey found, among other findings, that 40% of respondents have little knowledge about inflation, 38% have no familiarity with compounding, and 16% cannot make a decision whether they would choose a higher or lower interest rate on their mortgage.

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While Americans may realize the significance in retirement saving and focusing on the years ahead, Brandon Krieg, CEO and co-founder of Stash, notes the lack of knowledge that follows this recognition.

“As the survey shows, financial literacy is a problem in America – not one confined to a specific age or gender,” he says. “Our findings demonstrate the need to help all Americans establish a strong base of financial literacy to help them create smarter financial habits.”

Even though Americans, in general, continue to struggle with saving for retirement, the survey highlights several groups that can benefit from better knowledge: Millennials, women and beginner investors.

Data found shows that while 61.4% of Millennials are investing for retirement, only 48% of respondents are currently contributing to a 401(k), while 61% employ a traditional savings account.

Krieg suggests Millennials should begin utilizing and understanding the advantages of compounding investments.

“For Millennials to really make their money work for them, they need to utilize more savings and investment tools that capitalize on compounding,” he says. “This is an area where the lack of financial literacy is really detrimental to achieving long-term money goals.”

Although Millennials are investing for marriage, retirement and other future objectives, the survey found this age group also stores away for shorter-term goals—including vacations—more than any other generation, at 32.9% compared to Generation Xers (23.2%) and Baby Boomers (16.2%).

Surprisingly, Millennials came in first with investing for health care, at 8.9%, while Gen Xers came in second (6.7%); and Boomers at 7.3%.

Regarding women, survey results saw 47% of female respondents are investing somewhere in the middle between $1 to $500 a year, whereas only 36% of men are doing so. However, when it comes to investing more money, Stash reported that 37% of males are investing over $1,000 each year, while only 22% of women are saving larger sums.

Moreover, according to the survey, 50% of men and 49% of women save using 401(k) plans, but males are “twice as likely to use taxable investment accounts than women,” at 15% of men and 9% of women.

For beginner investors, findings demonstrated the importance in gaining investment experience, including knowledge in 401(k)s, 529 Plans; and Traditional Roth/IRAs, among other investment products. Adding to the large gap in investment knowledge between advanced and beginner investors, experienced investors are also “more than twice as likely to save using an IRA, and four times more likely to use a taxable investment account,” according to the survey. 

When it came to 401(k)s, only 50.9% of beginner investors said they used the tool to save, while 65.9% of advanced investors reported utilizing it. Additionally, 11.8% of beginner investors are not saving at all for the future, while only 6.5% of advanced investor respondents are not putting any money away.

More survey findings can be found here

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