The
financial services industry is undergoing its greatest upheaval perhaps in more
than 35 years because the government came up with a brilliant new idea to
pretend there is a crisis that they need to step in to save you. I have warned
that there has been talk about taking over 401K funds which are about equal to
the total national debt. There have been proposals that they just take control
of that and stuff it by mandatory investment in government bonds. Some
countries already require pension funds to be “conservative” and 85% of all
money must be in government debt. The one thing we know, whenever government
claims it is doing something to protect you, you can be sure the end result
will only put more money in their pocket.
As
of 2017, what is yours, will begin the process to become theirs. The new
ruling from the Department of Labor (DOL) affecting financial advice related to
retirement plans is pretended to protect consumers against high fees which
necessitates the government stepping in to monitor your 401K. Next, no manager
will be seen as competent and the Department of Justice will start to target
small retirement managers to expose them for fraud that they can then turn into
a justification for government to take over ALL 401ks. This is how the whole thing will unfold all because the
off-budget expenditure (Social Security & Medicare) are up 66% during the
Obama Administration and go negative next year. One way to cope with all of
this is to simple merge the failed government managed funds with the private
funds.
Consequently,
thousands of advisers around the nation are already scrambling to change their
practices to fit the new regulations, which start to go into effect next
January (with the balance in 2018). This coincides with the new international
G20 regulation whereby all countries will start report on everyone sharing that
info among themselves to hunt for taxes.
The
Office of Management and Budget’s $17 Billion Dollar number for the 401K
industry is too tempting for politicians to ignore when they are in desperate
need of cash. They justify this fake seizure claiming retired people are being
ripped-off with exorbitant fees, which is one of the biggest lies perpetrated
by The Obama Administration or any Administration in the past 100 years. This
even beats the Global Warming scam to raise taxes. The Obama Administration
doesn’t count in that figure any fees they regard as “reasonable” compensation.
To Obama, they are all unreasonable.
The
propaganda government always rolls out is their favorite tool to enable some
sinister plot to further their power. There is just a standard playbook. All
politicians pretend to care for the people. Whenever they plan something
sinister, they use props like children to surround themselves to pretend they
are doing good. This is standard operational procedure. This time they care so
much about your future they just can’t keep their fingers out of your pocket.
We
begin to see dramatic changes that impact even the fringe advisers like those
in the gold community. Telling people hyperinflation is coming and you should
sell everything for only gold will rise will suddenly become illegal and
probably criminal activity that the government can use as an excuse to seize
everything. The consumer will end up having to pay for information that is
separate and distinct from those selling the product.
The
final rule means advisers will have litigation to fear if they can’t prove
their retirement advice prioritized the client over themselves and they had no
conflict of interest.
Unquestionably,
this is going to be a much bigger change than the industry expects. This will
impact thousands of brokerage, advisory and insurance firms that offer
free advice within the $25 trillion retirement services market as a whole. They
will have to adjust all their operations and procedures to comply with the
rule. Indeed, some of these changes will need to be drastic and will
undoubtedly fundamentally shift the advice landscape as well as the investment
industry.
As
the DOL fiduciary rule begins to take effect next April, all financial advisers
will be required to recommend what is in the “best interests” of clients when
they offer guidance on 401(k) plan assets, individual retirement accounts or
other qualified monies saved for retirement. This rule does not apply to
after-tax investment accounts that may be earmarked as retirement savings or
just investing. However, the back-office compliance departments will grow
exponentially as a result. Citizens will have to sign documents searing the
monies are not for retirement. The current standard of requiring that
investment advice be “suitable” will be out the window. They’ll need to craft
new administrative steps and invest millions in technology and training to meet
the rule’s requirements. This will also mean advisers will face forced changes
in how they are paid.
However,
the new rule doesn’t ban commissions or revenue sharing. Nonetheless, it
requires advisers who accept them to have clients sign a “best interest” contract
exemption. Of course, that will be Pandora’s box to open for lawyers, which
they will of course do. The bottom-line means that the adviser will have to act
in the client’s “best interests” and only earn “reasonable” compensation. The
exemption also must disclose information to clients about fees and conflicts of
interest. Thus, a client will be able to then sue the adviser for any fees he
gets from someone else to promote an investment like precious metals or
muni-bonds.
The
nightmare that will unfold is that advisers who are really only domestic
oriented will suffer losses for their clients and then be sued. The mere threat
of increased liability will push many small manager/advisers away from a long
tradition of charging clients based on transactions, to a compensation method
that carries lower liability risks, that of billing clients a set fee. This
means that paying someone a performance fee may gradually fade away.
However, fee-based accounts typically don’t make money for firms and thus
offer little economic sense for firms. Advisers will be forced to drop
undersized retirement accounts leaving the little guy stranded. This will even
impact insurance companies who do have high-commission generating annuity
products. We are most likely going to see earning from companies
like Lincoln Financial Group, Prudential Financial Inc., and MetLife Inc,
decline. The DOL rule will undoubtedly limit investor choice and this may
be the end-goal. The DOL’s final rule is increasing the pressure also
on the SEC to approve a uniform fiduciary standard. This could have a serious
impact on proprietary trading of banks as well.
So
here it comes. The first step in regulating 401K and they will be looking to
prosecute people for conflicts of interest to make an example of them to
justify a further takeover.
https://www.armstrongeconomics.com/world-news/taxes/ department-of-labor-regulating-your-401k-april-16th-2017
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