Saturday, February 18, 2017

The Workers

Trump calls the media "the enemy of the people" echoing Stalin.  NPR uses the term "The Workers" echoing Karl Marx.   Both are wrong.

In a recent NPR piece, president Trump is rightly criticized for rolling back Financial rules promulgated by the Obama Administration. These fiduciary duty rules would place the burden on financial advisers to act in the best interests of their clients, something most of their clients assumed these financial advisers did already.

This rule was a good idea, and should remain in force.  But that's not the point of this posting.

For some reason NPR posits that this fiduciary duty rule is one that favors "workers" rather than just ordinary citizens.  The headline read:

Trump Moving To Delay Rule That Protects Workers From Bad Financial Advice

This choice of language is interesting, and it is a word that NPR uses often. What is disturbing to me is it is also a word that Karl Marx enjoyed using, as in "Workers of the world unite!"  Sadly, the media tends to do this a lot.  We are referred to as "consumers" or "workers" but never is just ordinary people, employees, or citizens - or maybe just human beings.  The media defines us by what we do and how much we spend.

Words matter. When you can set the language of the debate, you can control the debate. Here, NPR is slipping one under-the-radar by referring to people affected by this rule as "workers" instead of just ordinary citizens.

The fiduciary duty standard for financial advisers applies to everyone, regardless of whether they are "workers" or not. It applies to retirees. It applies to housewives. It applies to unemployed persons.  Why does NPR insist on using this term "workers"?

The answer is quite simple.  This is another example of NPR subtly slanting the news in a particular direction.  In this case it is the workers versus management or the little people versus the big people - the 99% versus the 1%.

The term "the workers" implies people who are actually working for a living.  It also implies that the  opposite of this term is people who don't work for a living or who live off the labor of others.  The term Communists use is "parasite."  In short, it is divisive language designed to separate us for one another.

What the hell was that?

The reality is, of course, that most of the investors in our economy are people like you and me. Mutual funds often drive companies to concentrate on quarterly profits and share price, sometimes to the detriment of the overall health of the company.  But the people who are pushing for higher rates of return on their mutual funds are not corporate fat cats or Wall Street 1%'ers, but rather ordinary citizens like you and me who want to see a better rate of return on our 401K plan.

In other words, instead of an "us versus them" scenario it is more of a "us versus us" scenario.  We all want to see higher rates of return.  We all want to see profits.  And we all want to see fewer regulations if it means that the companies that we invested will be more profitable.  We have met the enemy and he is us.

And we all want to have our financial advisers act in a manner which is in our best interests and not theirs, regardless of whether we are workers, management, retirees, or even unemployed persons. The use of the term "workers" is wholly inappropriate in this context as the law applies to everyone.

And this begs the question:  Why did NPR use this term?   It was not by accident, but purposeful.   I suggest three possible scenarios:
1.  The author of the piece has a communist bent and chose the word.

2.  An editor of the piece has a communist bent and chose the word.

3.  An editor of NPR news sent out a memo instructing reporters to use the term "workers" as often as possible, in a not-so-subtle attempt at agitprop.
There is a fourth possibility:  The people at NPR as so clueless as to think that financial advisers only advise people with jobs.   I don't discount this possibility.   However, given the frequency in recent months that "the workers" have taken over at NPR, I think #3 is a clear winner.

And this is why people call real news fake news.   When you slip in little shitty deals like this in to a straightforward reporting piece, you are sliding down a slippery slope towards Breitbart.  In fact, you could call NPR the Breitbart of the Left and they would probably be proud of that.

The fiduciary duty rule was a good one and did not place a "burden" on investment advisers or banks.   These are people who should be advising you in a neutral manner, and not merely act as salesmen for the financial institutions.   And that is what they were - mere salesmen, as I learned the hard way.

As I have learned over the years, financial advisers should be approached with caution in any event. While they often claim they are not being paid for their efforts, they usually make a commission from the sale of new mutual funds or other investments. There is a reason why they want you to transfer your funds from another account to their accounts, usually because they get 5% off the top. That's also the reason they don't want to talk to you if you don't have any money to invest, or are just starting out investing.

As I noted in my posting my 20 years with Northwestern Mutual, I discovered that my "best friend in the world" who was my Northwestern Mutual agent was really not so much my best friend has he was a salesman trying to sell me products. I made the mistake of assuming that he had my best interests at heart when he really had his own. He made a commission on each product he sold me and I should have been mature enough to understand and realize this.

This was my fault, not his.  I started to get an inkling about who he really was when I saw his Facebook page which listed "Fox News" as his favorite television program.  Even if you are a conservative, liking Fox News is idiotic.   I also started to catch on when he tried to sell me more and more policies - the breaking point being a nursing care policy that would have cost me $500 a month or more.   He was in it for the money, and I was naive to assume otherwise.   A car salesman may be friendly to you, but that doesn't make him your friend.  He is your financial adversary, period.   Similarly, an insurance or investment salesmen (and they are not "advisers" or "counselors" are just salesmen) are not your friend, but foe.
Every investment house I've dealt with seems to have one strategy in common, and that is to encourage me to move some or all of my investments to their organization.  As I noted in my posting about State Farm Bank, the only constructive advice the investment adviser could provide me was to cash in all of my investments - even my life insurance - and put it all into State Bar State Farm Bank funds. When I asked what the advantage of this would be, the agent could only say "convenience." Mark was smart enough to see this right away and walk out the door.  I followed shortly thereafter.

Our Fidelity adviser with somewhat better, although I never quite understood what the point of his advice was, or the confusing pie charts they sent me on a regular basis.  He moved money around from one fund to another, but it never seemed that the advice he gave us was really worthwhile in terms of how much money we would need to retire and whether we were on track to retirement - two questions he always eluded answering, and the two questions that every person investing really wants to know.

Sadly, there are lot of investment advisers out there, many with storefront operations. People feel confused and befuddled by the investment process when really it is not that difficult.  The problem, of course is that people want to see huge rates of return on their investment (greed) and don't know how to go about getting this themselves.  They are uncertain where to invest, because they are scared of losing money on poor investments (fear).  So, they think they can talk to an expert who will invest their money and make huge profits. They fail to realize that if the expert could really make huge profits from investing, he wouldn't need your money but would rather be making huge profits on his own.

Most investment advisers counsel you to invest your funds into a number of fairly safe mutual funds with moderate rates of return - which is probably the best bet for 90% of the population.  In return for selling you these funds, they get a commission, usually based on a percentage of the money invested. They will even tell you that they are not charging any fees.  In one instance, an investment adviser told me that I was in a "no load" fund when in fact it had a 5% load up-front.  Yes, they lie, and that was what the new fiduciary duty rule was designed to prevent.

Yes, Virginia, verbal promises of investment advisers are not enforceable under the law, mostly because you can't prove that they said them in the first place.  This goes for any verbal promise made by anyone including people selling you timeshares or used cars - which are about the same level of trustworthiness as an investment adviser.

The long and the short of it is that the new rule that forced investment advisers to act in the best interests of their clients will shortly be repealed.  Even if the rule was not repealed, I am skeptical that it would be easy to prove if an investment adviser gave you poor advice or did not act in your best interest.  The burden of proof would be very difficult, unless you got shitty advice in writing.

Thus, the only solution is to look out for your own interests. Take advice from anyone trying to sell you something with a grain of salt.  Investment advisers are not being friendly and nice to you because they are friendly and nice people. They were trying to make a living and a few so they have to sell you a product and earn a commission.

So we're going back to the era of Caveat Emptor.  Buyer beware.  I'm not sure we ever left it.