It never fails that regardless President Barack Obama’s vigilance in protecting the American people from greedy predators, a certain group of pretend liberals accuse him of solely serving the interests of Wall Street; these faux-liberals are the emoprogs. There is no doubt that as a group of financial entities providing a service for a fee, some investment firms and banks do not put their clientele’s best interest first and foremost as any part of service consideration.
President Obama has taken a step to remedy that situation and even before the rule’s implementation, one Wall Street giant is bailing out of the business. Because as one writer acknowledged, if President Obama “won’t let them screw over retirees, they won’t play anymore.”
It seems likely that most Americans, even the preponderance of stupid Americans, would agree that any service provider, especially a highly-specialized financial service provider’s primary consideration would be what is in their client’s best interest. However, that is not the case and not a surprise that Wall Street needs a rule to adequately serve their clients and investors.
To encourage some financial advisors to consider their clients’ welfare, President Barack Obama has taken steps with a new Wall Street rule through the Department of Labor. The rule simply requires brokers and financial advisors to look out for their clientele’s best interests and not how much they profit at the client’s expense. To Republicans and Wall Street, this proposed new rule is an abomination of epic proportion because it puts pressure on giant retirement investment entities to actually provide a service their clients are paying handsomely for.
With Republicans attacking retirement and pensions across the nation and seeking devious means to force Americans into risking their retirement with Wall Street, President Obama acted to protect American retirees. The President said the new rules are necessary to force financial advisors to put the clients’ best interest first when, regardless of age, Americans invest in their own private retirement accounts.
The new rule seems like it would have been common good practice for any advisor claiming to look out for their clients’ old age incomes. Apparently, good practice is not common among retirement account advisors and Republicans and Wall Street want to keep it that way. The new rule simply says that “instead of only pushing their own retirement products, or those that they’ve been commissioned to sell, financial advisors have to consider what’s best for the investment portfolio of their client.”
That impending requirement from the Department of Labor was just too much for Wall Street investment giant American International Group Inc. (AIG). For Americans whose memories are limited to what happened an hour ago, AIG is the Wall Street giant the American people bailed out to the tune of $182 billion when it was functionally bankrupt in 2008; it was considered “too big to fail.”
As an aside, and to provide context and demonstrate AIG’s continuity of greed, two years ago AIG sued the federal government and American people for being selfish. Apparently, handing over $182 billion in taxpayer money was “not sufficiently generous” regardless the bailout saved the investment and insurance giant from its self-inflicted and near-fatal doom.
AIG is so opposed to “serving” their client’s best interests that instead of adhering to the new Obama Department of Labor (DOL) rule, they are selling the AIG Advisor Group to a Canadian pension investment manager. AIG’s CEO, Peter Hancock, said the DOL rule “might increase compliance costs” for AIG Advisor’s division that only made $40 million in profits last year. There is no telling how many clients were “underserved” by AIG brokers and advisors, but if the Wall Street giant is bailing out to evade a simple new rule, then it had to be a significant number.
Technically, the Obama DOL proposal is called a “fiduciary rule” and is not in the least burdensome. Now, brokers are required to offer investments that fit a client’s needs and risk tolerance at the time of the sale, but like many self-interested businesses they typically push only their products despite they are not in the clients’ best interest. The new rule still allows brokers to earn sales commissions and other income precisely as they do now, but only if they “sign a best-interest contract with their clients.” A “best-interest” contract is one that discloses to the client, up front, the fees and incentives that influence the brokers’ and advisors’ product recommendations.
Under the Labor Department’s proposed rule, brokers will still earn sales commissions and other income no different than before the rule’s implementation, but only if they sign a “best-interest contract” with the potential client to disclose the fees and cash incentives that typically influence advisor recommendations. Neither AIG nor its brokers and advisors will lose fees, commissions, and/or incentives for steering clients to invest only in AIG products, they “just can’t keep it a secret” that they are not serving the client’s best interests in pursuit of personal and corporate profit; what the White House Council of Economic Advisers (CEA) called apparent “conflicts of interest.”
The White House CEA performed an analysis and found that this particular Wall Street conflict of interest results in yearly “losses of about 1 percentage point for every affected investor, or about $17 billion per year in total;” all losses for retirees. A one percentage point lower return will reduce a worker’s retirement savings by more than 25 percent over 35 years. Every penny of that 25 percent flows into Wall Street coffers and instead of losing out on those billions that rightfully belong to retirees, AIG chose to sell the business before they will allow an Obama rule prevent them from fleecing their trusting clients.
Audio engineer and instructor for SAE. Writes op/ed commentary supporting Secular Humanist causes, and exposing suppression of women, the poor, and minorities. An advocate for freedom of religion and particularly, freedom of NO religion.
Born in the South, raised in the Mid-West and California for a well-rounded view of America; it doesn’t look good.
Former minister, lifelong musician, Mahayana Zen-Buddhist.