Thursday, February 26, 2015

Retirement Funds

Matt Levine writes of the White House proposal to rein in fees in retirement accounts:
The world view underlying this report seems to be that a lot of what the financial industry does is extract unproductive fees for itself from ignorant consumers, and that you can crack down on the fees -- and save consumers money -- without reducing the incentives for any socially productive activity. This, it goes without saying, is a hugely popular theory. I feel like it is generically wrong, but there may be many, many places where it is specifically correct.

It's the same world view FLG has been concerned with since at least 2009:
For most banks the real profits now come from late fees, balloon payments, default interest rates, and a host of other tricks and traps. In other words, making a profit has become an exercise in misdirection and misinformation. Sneaky has become the norm. 

Should most people just invest in low cost, passively managed index funds?  Absolutely.   Are there perverse incentives in financial advising?   Absolutely.   Do we need to make brokers and financial planners fiduciaries?   Absolutely not. 

2 comments:

The Ancient said...

FYI...

http://www.telegraph.co.uk/finance/personalfinance/investing/11437697/Irving-Kahn-the-worlds-oldest-investor-dies-at-109.html

FLG said...

I finally ordered a copy of The Intelligent Investor.

 
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