DOL Fiduciary Failure #526: Do Financial Planning Associations Care About Improving Outcomes... At A
I frequently wonder if I may - as a fiduciary to my clients - have to tell them to avoid saving to retirement accounts because of the increased risk they will lose control over them.
While it isn’t likely to come to that yet, the never-ending push by ‘those who know best’ in the retirement and fiduciary conversation is taking a predictable turn from trying to have the government control the delivery of financial advice, to the shaming advisors who do not adapt to the statist academics positions.
Ron Rhoades is a professor and recipient of far too much money from organizations I belong to, while advocating for more government control over members, rather than anything in our (and the average investors) interests.
In his latest two blogs he does what he does best – tells everyone to trust him, virtue signals, and contradicts himself and does not realize it.
Lest you think that is a cruel statement rather than a factual one, let me explain, and let me explain why Mr. Rhoades is a danger to financial planning.
In a blog posted May 6th, Mr. Rhoades gushes over the government-sponsored Thrift Savings Plan (TSP). ‘Why, it is so righteous to have such low costs, there is so much that is so admirable about the government system.’ The government plan is doing nearly everything correct by Mr. Rhoades’ standards, except they do not offer a few ‘multifactor’ mutual funds that would benefit investors. This simple chance could make the different in 1-2% per year to investors says Mr. Rhoades.
But, wait… I smell a business trying to make money on retirement savers…
Yes, scrolling down to the May 5th entry we see how low Mr. Rhoades thinks of financial advisors who may not recommend ‘multifactor’ funds. They may recommend funds that cost 0.25-1.25% more than the TSP plan.
Ugh! How low can a financial advisor be? How insidious are these advisors? (Answer: So insidious that he uses the word multiple times in the same paragraph.)
In reviewing their investment line-up, it appears that a large brokerage firm has determined that it is better to offer certain funds over others that Mr. Rhoades prefers.
How dare this successful firm with thousands of advisors tell Mr. Rhoades how to run a business!
Mr. Rhoades is anti-financial advisor, anti-consumer, pro-state, as are others I’ve written about here would believe they can manage your money better than you and your advisor.
If Mr. Rhoades was pro-financial advisor – as one may think of someone who takes funds from financial advisory associations – he would use the same language or worse when describing the government’s Thrift Savings Plan, which does not allow for payments to advisors, does not all members access to their funds in retirement, does not have a friendly online system that members can easily access without problem, etc., etc., etc.
However, Mr. Rhoades would be perfectly happy if military members just left their money in the TSP plan, which is deposited into a low-interest government bond fund. Members don’t receive the advice they need to manage this account, so it is lost to inflation. It also has been threatened by government shut-downs to lose value.
But, keep your money with the government system. Don’t you dare pay an advisor!
The value of working with an advisor has been placed at 3-5% by groups like Morningstar, Vanguard, and others. Having nearly a decade of working with military members, I would place that value significantly higher for them, as many do not sign-up for their plan, or if they do, they do not move from the low-interest option.
So, a cost of 0.25% is insidious, but a government program maybe costing investors >5% per year is virtuous?
Financial advisors and associations… individuals like Mr. Rhoades are advocating for removing your ability to receive compensation to help your clients. Wake up!
Note that while advisors and clients are concerned with helping improve the outcomes of their clients lives, the TSP, government, and Mr. Rhoades himself are not.
Is Mr. Rhoades concerned with any of the problems for military members I mention above? I’ve never seen him pen such a concern, or advocate for more freedom for participants.
Here are a few other questions I would have for Mr. Rhoades:
Is he concerned with the fact that most military members don’t sign-up for the TSP?
That they don’t receive objective advice on what funds may be appropriate?
Or, on whether to save to the Roth TSP or regular?
How about instruction on to access their funds under the arcane distribution rules of the TSP?
Perhaps he is concerned that no one is helping them craft financial plans to know if they are saving enough?
Is he concerned that the government has threatened the savers of the TSP with non-payment of their savings during the last government shutdown?
Or, that the default option is this savings fund, which navigating the government website log-in systems ends with many giving up and not changing from the G-fund?
No. No concern whatsoever. It’s simply praise for the low-cost government plan that fails on so many fronts, and admonishment for advisors who are worth their fee for actually assisting their clients!
Statist are never concerned with maximizing outcomes, their only concern is in controlling them to be equal. Which means equally poor.
So long as we adapt what he ‘knows is best’ in “multifactor” index funds (whatever that means), all is well. Forget the actual and obvious solution is financial advice.
My greatest concern for my clients is these individuals and their poor ideas are ever increasingly being promoted. I’ve written here about Mr. Rhoades and other academics who would (and propose) sell your to the worst Wall Street hedge-fund manager, so long as they can control the system. Even a fee for an advisor less than their value is too much! Even though the individual chose to hire that advisor that they determine will help them without coercion and force.
Financial planning organizations that pay Mr. Rhoades for his ‘expertise’ do their members and the public at large a disservice. It is very clear that the answer to our needs is more freedom, not less, and more choice for the public to determine on their own the advisory relationship that fits them the best.
If they don’t, the only good advice will be to avoid saving to these plans. As Mr. Rhoades so correctly points out, the tax savings is not enough to give up 1-2%, and possibly much, much more for those of us who need advice and guidance, to let someone who doesn’t know you determine the outcome of your finances.
PS Just another personal contradiction in Mr. Rhoades that the broad public would not have been aware of – he has in the past made claims that a ‘fiduciary’ can not offer ‘new and untested’ products and services; much of the new products in the ‘multifactor’ investment category fit into this definition of new, untested, and expensive.
PPS Just another contradiction I’m recalling… Mr. Rhoades has been published as saying that a fiduciary can only have time to work as a fiduciary; but, as our ‘better’ he can be a professor, advisor, lobbyist, expert in ‘multifactor investing’, and anything else I imagine except seeing the conflicts in his own positions.
PPPS To prove Mr. Rhoades' inconsistency and that he advocates for the end of the financial planning industry, we not only see him in these blogs claiming that advisors can not be compensated for their advice, but in this article he claims advisors can not recommend rollovers from the same TSP plan that he just said was costing investors 1-2% per year! Given that the average advisor charges ~1.25% per year, adds 3-5% in value, how can anyone think that the TSP investor should not work with an advisor under a rollover?
Mr. Rhoades, like every good movie villain, tells us exactly what his plans are in promoting the fiduciary rule. It is not about increasing outcomes or protecting retirement investors. It is not about 'protecting' investors from financial advisors, since the alternative for many is no financial advice.
It is about government control over investors. And, that is frightening.
Can the financial planning industry find anyone that will advocate for the interests of advisors and the broad public with some sort of message and philosophy other than, “Do what I say because I’m right?” Or, can we at least find someone with a little less contempt for planning?