"Financial firms lobby hard against stricter protections" by Christopher Rowland, Globe Staff November 16, 2014
WASHINGTON — The sting operation had the trappings of a Wall Street thriller, except that it was run by a team of Harvard and MIT economists. In an audacious experiment, the professors dispatched a squad of undercover operatives across Cambridge and Boston to pose as middle-class investors and ask retail brokers for investment advice.
The results were revealing. Just 21 out of 284 brokers contacted by the phony clients recommended investing in index funds, which mirror broader market performance and carry the smallest fees.
Nearly half the brokers, meanwhile, steered clients toward actively managed mutual funds. Those funds — which sometimes beat the market but most often don’t — carry higher fees that enrich brokers and fund managers but, critics say, stunt the growth of middle-class nest eggs.
You're kidding!
“You get a worse deal,’’ said Antoinette Schoar, an MIT finance professor who helped lead the experiment, which received little attention when it was published in 2012.
But you know who got a good deal.... and I'm neither $urpri$ed nor $hocked by the little attention from the pre$$.
The type of routine sales practices highlighted in the Massachusetts study, and a recent follow-up in New York involving 650 undercover visits, are driving an impassioned debate in Washington about whether small investors need stronger protections from an industry aggressively competing for a slice of their retirement savings. Advocates want strict rules forcing brokers to put their clients’ interests first.
This $ociety is so rife with money junkies at all echelons of power right now. Metaphorically, the steaming stench from a swirler literally oozes from its print. Even the banker's mouthpiece can't cover the greedy stench and corruption emanating from its pages.
We are talking RETIREMENT MONEY and OLD FOLK, here -- and the money mangers want to steer you into funds that will give 'em a bigger cut!
And they f***ing wonder -- or not, probably; they don't care -- why we don't tru$t them?
The battle pits an array of consumer watchdog groups, AARP, and labor unions including the AFL-CIO against a slew of big, nationally known companies, with Fidelity Investments, which is headquartered in Boston, and MassMutual Financial Group, based in Springfield, prominent among them.
Okay, the framing of everything as a war in a war paper, right down to the terminology, is no longer surprising. The pre$$titutes are too far gone down the road of value internalization to the point where it is leaking from the prose.
What I find interesting is the battle is between those interests that were sold bad mortgage-backed securities crap rated AAA into their pension funds, which later dissolved into nothing and forced union givebacks while drawing chump change fines that are nothing more than kickbacks to a government that not only allowed but enabled it all to happen, against those interests that are vested in Wall Street and the stock markets that basically do nothing but enrich the 1%.
Of course, were I an elite of Bo$ton sitting down with a cup of coffee on a Sunday morning after brushing my teeth, this would be a very compelling read.
Investment firms have spent millions lobbying the administration and lawmakers, including $450,000 on a secretive effort in which the participants’ identities are kept under wraps.
That doesn't look like the representative democracy and republic I was told about in school.
The industry says that excessive restrictions on brokers would make it economically unfeasible to offer financial advice at the lower end of the market. After winning delay after delay from regulators, they have fresh political developments to cheer.
I'm glad $omeone is happy. I will be when I see them in hell and devour their innards.
Hostility to Wall Street regulations is expected to intensify in Congress with the Republican takeover of the Senate, posing a new test of President Obama’s resolve in his last two years in office.
Yeah, somehow the anti-Obama vote benefited Israel, the war machine, and the bankers. Wow.
Kentucky Senator Mitch McConnell, likely to rise to majority leader in January, said the Senate Banking Committee will seek to repeal elements of the Dodd-Frank Act, a 2010 financial industry reform law that he called “Obamacare for banks.’’
They never really finished writing rules for it anyway, and Wall Street is back to the $ame old $henanigans as before.
For all the lobbying over financial reform, the struggle over how to regulate retail brokers could have the biggest impact on mom-and-pop investors.
Are there any left?
Supporters of tougher standards say they want to reduce the influence of hidden payments and commissions that give brokers an incentive to steer clients to high-fee investments regardless of return.
“What the industry is fighting for is to continue to have undisclosed conflicts of interest that allow them to put their personal economic interest above the best interest of their clients,’’ said Dennis M. Kelleher, chief executive of Better Markets, a nonprofit advocacy group that supports regulations to change broker behavior.
I'm $tunned that they would do that, the vampiric $cum.
The Department of Labor is expected early next year to formally propose a hotly contested rule that would require brokers offering retirement investment advice to put the interests of their clients ahead of their own. The Securities and Exchange Commission, after completing a study required under the Dodd-Frank law, is deciding whether to move ahead with a similar standard.
Why is that so "hotly conte$ted?"
Both rules would expand what is known as a “fiduciary’’ standard governing investment advisers. Some advisers — called registered investment advisers, or certified financial planners — already adhere to a standard putting their clients’ interests first. Brokers are subject to a looser rule, which requires investments they recommend be “suitable’’ for a client.
Critics say the “suitability’’ standard leaves too much wiggle room for brokers to benefit themselves and their employers by promoting investments that are more costly for the investor.
Why do you think the rest of us rabble is on this earth?
If not that, I can't imagine what it could be.
The stakes are high for middle-class consumers, many of whom have been pushed out of traditional workplace pensions in the last three decades and now must make their own investment choices, navigating a landscape of 401(k) plans, individual retirement accounts, and annuities.
At least I will not have to worry: mine are all gone.
Americans had $5.4 trillion invested in IRAs alone at the end of 2012, according to the Investment Company Institute, a trade group.
Excessive fees and underperforming investments can, over time, shave tens of thousands of dollars or more off middle-class retirement account. But typical investors are often not sophisticated enough to spot the pitfalls, and they may fall victim to sales tactics disguised as earnest financial advice, say advocates for tighter rules.
In AmeriKa?
“If they want to sell me a yellow Volkswagen, I want to know: Are they really selling me a yellow Volkswagen because it’s good for me, or if it’s because they are getting an extra commission because they are selling me a yellow Volkswagen,’’ said US Representative Michael Capuano, Democrat of Somerville, on the House Financial Services Committee.
A fellow committee member, Representative Stephen Lynch, Democrat of South Boston, and both Massachusetts senators, Democrats Edward Markey and Elizabeth Warren, also support the initiatives.
Some of the disagreement has been fueled by the rise of low-cost index mutual funds, which were pioneered in the 1970s by the Vanguard Group, which is based in Pennsylvania and is Fidelity’s largest rival.
Overall, actively managed funds with their higher fees have fallen behind index funds in performance. More than 70 percent of actively managed mutual funds failed to deliver higher returns than the market in the last five years, reported SPIVA Financial Scorecard, part of McGraw Hill Financial.
At least the managers got rich!
Mutual fund companies point out that actively managed funds are still worth a bet because they offer at least a chance to beat the market, while index funds — by their very nature — do not.
I'm not much of a betting man, and today am particularly annoyed at a result that cost me $500.
As any viewer of a televised New England Patriots football game or professional golf tournament will attest, financial planning services and investment advice are widely marketed to Main Street investors. Fidelity, for instance, aired spots for its “Green Line’’ advisory services this month during the Patriots’ big win against the Denver Broncos.
You don't have to tell me.
These advertised services utilize brokers working under the “suitability’’ standard. Like most mutual fund companies, Fidelity offers both actively managed and index funds; it says customers buy shares in both types. In a statement, Fidelity said several of its managed funds have built up records of beating the market, and its array of managed offerings performs better than the national average.
Fidelity and others in the industry have offered qualified support for revised SEC fiduciary rules, but the agency has been studying the concept without action for years.
Do I even need to type anything?
The Department of Labor regulations, focused on retirement investing, are generating more heated opposition. Industry executives and lobbyists point to a 2010 draft that was widely panned as overly strict, and then withdrawn. They contend the next version also is likely to be excessively restrictive, and have launched waves of preemptive political strikes.
Under terms of the 2010 proposal, “much of the financial education and guidance currently available to Americans would be significantly limited — even if the guidance is in their best interest,’’ said Ralph Derbyshire, a Fidelity senior vice president. “The result would be that many people, particularly middle- and lower-income workers, would be priced out of the market to get the help they need to plan and save for retirement.”
That will keep you working till death!
The argument is echoed in Congress, where Republicans and Democrats have bombarded the labor agency with letters.
About a dozen anonymous financial companies have banded together for a lobbying campaign that has sent studies and reports around Washington to support industry positions. Listed on public disclosure forms only as “Broker/Dealer Coordination Group,’’ the informal organization is managed by Kent Mason, a lobbyist with offices on Pennsylvania Avenue.
A 2007 law restricting such “stealth lobbying’’ organizations requires disclosure of individual members. However, the law also permits them to remain anonymous if each member spends less than $5,000 per quarter on lobbying activities.
Mason declined in an interview to name the companies in the group, which has spent $450,000 since 2011. MassMutual confirmed it is a member; Fidelity would not say.
“We are not going to confirm nor deny our participation,’’ Fidelity spokeswoman Eileen O’Connnor said, pointing out that the company routinely discloses its lobbying activities, “but we often work with like-minded firms on many regulatory issues that could impact our business or our customers.’’
The findings of several of the reports issued by the Broker/Dealer Coordination Group have been disputed. One is a survey, released with the US Hispanic Chamber of Commerce, warning that the Department of Labor rules would prompt large numbers of small businesses to drop 401k plans.
Consumer advocates contend the report was based on a loaded survey question. In the question, respondents were told retirement plan managers might be prohibited from giving employers investment guidance. False, say advocates.
“This is the Wall Street fog machine that spews out misrepresentations, disinformation, if not outright lies,’’ said Kelleher, with Better Markets.
I call it a new$paper.
Some question the industry’s aggressive mass marketing of personalized investment advice when a formula based on a family’s projected retirement dates and risk tolerance can easily produce a lineup of low-cost mutual fund options, said Schoar, the MIT professor.
But a finance professor at Boston College who studies investor behavior, Jonathan Reuter, said brokers play an important role when someone is leaving a job and needs to roll over a 401(k) plan into an IRA. In that scenario, even biased, self-interested advice is better than no advice at all, because a broker will at least encourage keeping the money in savings rather than, say, buying a new boat.
“It would be great if brokers just gave unbiased advice, but it also would be great if you went to Sears and they gave you unbiased advice on what washing machine to buy,’’ he said. “But that is not the world we live in.’’
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That's not my world.
Full off wonderfully altruistic people, though:
"Fidelity fund becomes pace setter in charity" by Deirdre Fernandes | Globe Staff November 12, 2014
Fidelity Investments, best known for mutual funds and retirement plans, now oversees more in charitable contributions than much better-known philanthrophic organizations such as the Salvation Army and the American Red Cross, and it is on the verge of surpassing the United Way.
The Boston financial giant entered the world of philanthropy through a nonprofit it established to manage charitable donations and provide tax shelters for its investors. Last year, the nonprofit, Fidelity Charitable, brought in $3.7 billion from clients, placing it second on The Chronicle of Philanthropy’s rankings of the country’s largest charities, just behind United Way.
The nonprofit offers what are known as donor-advised funds, which allow investors to place money into the accounts, take full deductions as if giving directly to nonprofits fighting such problems as cancer or homelessness, and dole out the money over the course of years, or even generations. Critics, though, say the money doesn’t get to charities fast enough.
Did you know "nonprofits provide new ways for corporations and individuals to influence (as if they didn't have enough already)?"
Related: Donor-advised funds: Where charity goes to wait
It's all a big tax break while Fidelity sits on it.
Fidelity’s nonprofit is poised to become the nation’s biggest charity in 2014, according to the Chronicle of Philanthropy. It matched United Way’s 2013 total of $3.9 billion in the just first nine months of the year.
“To move so fast to the top, that’s unheard of,” said Stacy Palmer, editor of the trade journal.
Donor-advised funds have been around since the 1930s and were a cornerstone of community foundations, which helped wealthy donors direct their gifts to local causes. In 1991, Fidelity received IRS approval to create its public charity to manage these funds, and it has used its size, reach, and access to clients to bring donor-advised funds to the forefront of charitable giving.
Other investment firms followed with similar funds, including Charles Schwab Corp. of San Francisco and Vanguard Group of Valley Forge, Pa.
All donor-advised funds held $45 billion in assets in 2012, a nearly 55 percent increase since 2009, according to the National Philanthropic Trust, a nonprofit adviser and fund manager.
Related: "Since roughly 1980, income has grown most for the top earners and dropped for the poorest 20 percent. Incomes for the highest-earning 1 percent of Americans soared 31 percent from 2009 through 2012, after adjusting for inflation, according to data compiled by Emmanuel Saez, a University of California economist. For everyone else, it barely budged."
Which is strange because the wealthiest philanthropists did not give as much in 2013 as they gave before the Great Recession, even as a "strong stock market and better business climate have continued to concentrate American wealth in the top 1 percent of earners."
This growth is reshaping philanthropy, leading charities, including the United Way, to establish their own donor-advised funds not only to strengthen ties to contributors but also generate income from management fees.
Nothing like $kimming off the funds meant for the poor.
But critics argue these funds trap needed resources and delay financing to charities helping the poor, feeding the hungry, or researching cures for diseases.
That's not the real rea$on for them, duh!
Once an investor gets the deduction, there’s no incentive to distribute the money to charities since tax rules don’t set a time frame for doing so, critics say. The money is “ just sitting there,” said Ray Madoff, a law professor at Boston College....
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Related: Fidelity Won War With Washington
Charitable Po$t
I suppose it's all funny to some.
And speaking of Madoff:
"Maine philanthropist accused of embezzling $3.8m" by Nestor Ramos, Globe Staff November 16, 2014
CAMDEN, Maine — The signs started showing up around town a week or so after the news about Rusty got out, hand-scrawled on index cards tacked up everywhere:
“$3.8M!”
That’s how much Russell “Rusty” Brace, 81, is accused of embezzling from the high-profile local charity he ran for 17 years before retiring this summer. In Camden, where Brace was a fixture and small-town values like trustworthiness are a point of pride, that number was more than enough to set heads to shaking.
“You can leave your keys in your car here,” said town Selectman Leonard Lookner. “Well, we left the keys in the car. And Rusty drove off with it.”
Brace has been sued by United Mid-Coast Charities, a mini-United Way of sorts for two counties on Penobscot Bay. Brace, who ran the charity as its unpaid chairman from 1997 through this summer, is also the subject of a federal investigation that his lawyer acknowledged probably will result in criminal charges.
A complaint filed last month in Knox County Superior Court alleges that Brace stole nearly $4 million by depositing donations in his own account. Confronted by the charity’s new chairman and others in September, the lawsuit alleges, Brace admitted that he stole the money “for his personal use and benefit.”
The civil suit is now on hold, according to court records, stayed for 60 days because of a criminal investigation by the United States Attorney’s Office in Maine. The charity was granted liens on Brace’s various bank accounts and properties, court records say, because a judge determined it was more likely than not that Mid-Coast would prevail in the suit.
Brace’s lawyer, Peter DeTroy, said that neither he nor his client would discuss the specifics of the case. But he said that Brace “is pretty much resigned to the fact that there will be charges.”
Stephen Crane did not know he was walking into a nonprofit nightmare when he took over as chairman of the charity following Brace’s retirement. Crane said he discovered what had occurred when he solicited a donation.
“A large donor indicated to me that he had given certain checks,” Crane said. But Mid-Coast had no record of the donations, and the canceled checks showed they had been deposited at a bank where the charity has no accounts.
Bank records show that Brace had done the same thing again and again over the years, depositing checks as large as $200,000 into his own account beginning in 2001, the complaint alleges.
“I just kept shaking my head,” Crane said.
Locals in the small coastal town, where sailboats bob off granite-and-pine shores and trendy new restaurants cater to vacationers and a community of well-to-do summer residents, described Brace as a gruff, self-serious sort who turned on the charm when he was among the area’s moneyed set.
His persona, his bloodlines, and his three homes — his primary residence in Rockport is assessed at $774,800 — left little reason to question where Brace’s money came from.
“I thought he was a pretty good businessman. I guess I have to reevaluate that,” said Parker Laite Sr., who spent decades working side-by-side with Brace on various boards and said he considered him a friend. “I was as flabbergasted as anybody.”
Long before he became the town pariah — “Rusty Madoff,” as locals joke over morning coffee at Boynton-McKay Food Co. on Elm Street — Rusty Brace was an ambitious man about town....
“I suppose he’ll end up dying in prison.”
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I keep saying it, but it's money junkie $cum at all levels of AmeriKan in$titutions these days.
NEXT DAY UPDATE: Bad news for Bernie Madoff victims
FURTHER UPDATES: Former Madoff executive gets 10 years in prison
