Wall Street brokers free to rip off retirees

One of President Barack Obama’s top economic advisers said abusive trading practices are costing workers billions of dollars in retirement savings each year and called for stricter rules on Wall Street brokers.

Snidely+WhiplashJason Furman, chairman of Obama’s Council of Economic Advisers, drafted a Jan. 13 memo citing research that says some broker practices, such as boosting commissions with excessive trading, cost investors $8 billion to $17 billion a year.  The document was circulated to senior aides and indicates the White House may support tighter oversight of brokers who handle retirement accounts.

The memo, obtained by Bloomberg News, makes the case for a Labor Department regulation that would impose a fiduciary duty on brokers handling retirement accounts, requiring them to act in their clients’ best interest. Under current rules, brokers are held to a ‘suitability’ standard, meaning they must reasonably believe their recommendation is right for a customer.  [snip]

The document says researchers’ estimates of up to $17 billion in investor losses are “quite conservative.”  Investors lose five to 10 percent of their long-term savings due to conflicted advice, according to the memo.

“Academic research has clearly established that conflicts of interest affect financial advisers’ behavior and that advisers often act opportunistically to the detriment of their clients,” the memo says.  That includes the practice of brokers receiving payments for selling certain mutual funds.

via Bloomberg Business.

Financial ripoffs in the recent past have been justified on the groups that clients were sophisticated investors who should have know what they were getting into.  But the average American working person, saving for retirement, is not sophisticated.  I don’t think many realize that their brokers were not required to act in their best interest.

The Obama Labor Department could have changed the regulation at any time during the past six years.  Will it act now?  It will be interesting to see.


While Deflategate and Chaitgate Rage, America Quietly Robs Its Elderly by Matt Taibbi for Rolling Stone.

White House Aide Calls for Stricter Broker Rules on 401(k)s by Dave Michaels and Margaret Collins for Bloomberg News.

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2 Responses to “Wall Street brokers free to rip off retirees”

  1. prayerwarriorpsychicnot Says:

    Reblogged this on Citizens, not serfs.


  2. sdbast Says:

    Reblogged this on sdbast.


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