A new executive order the Trump administration introduced on Feb. 3 would drain your 401(k) to fund the private equity industry by repealing a previous Department of Labor fiduciary rule, the Intercept reports.
The fiduciary rule, which was to go into effect in April 2017, “would have forced investment advisers in workplace retirement plans like 401(k)s to operate in their clients’ best interests, rather than recommending high-cost, high-risk products that offer the advisers kickbacks and perks,” according to the Intercept.
Trump’s order specifically outlines the intent to “empower Americans to make their own financial decisions, to facilitate their ability to save for retirement and build the individual wealth necessary to afford typical lifetime expenses.”
However, if rescinding the fiduciary rule puts more options on the table for Americans to choose their retirement funds, it’s not necessarily putting good options out there. The Intercept described it as adding “poison” to the available retirement options, pulling on former Goldman Sachs president Gary Cohn’s assessment of the Labor Department’s proposed fiduciary rule.
Cohn said of the rule, “[it] is like putting only healthy food on the menu, because unhealthy food tastes good but you still shouldn’t eat it because you might die younger.” One explanation for the proposed executive order is that President Donald Trump’s colleagues in the private equity industry could benefit financially from having the opportunity to add their own — though probably poisonous — choices to the table.
Trump already confessed in 2014 that if he ever ruled the U.S., “the world would be screwed” with the exception of his own friends.
“@damiranz: DonaldTrump: Pls don’t run for president. If you do and win, the rest of the world would be screwed” So true, (except friends)!
— Donald J. Trump (@realDonaldTrump) August 23, 2014
Perhaps this is why President Trump, on the same day he issued his Memorandum on Fiduciary Duty Rule, he also met with Steven Schwarzman, who heads his White House jobs panel. Schwarzman is also the CEO of Blackstone, the world’s largest private equity firm, reports the Intercept.
Trump told Schwarzman and his jobs panel, “We’re getting rid of your regulations.”
Per the Intercept:
[P]rivate equity has been accused of deliberately reporting exaggerated returns to harvest fees. And even if the returns were legitimate, this would still throw millions of retirement dollars into an industry that has been sharply criticized for its predatory version of capitalism.
Eileen Appelbaum, a senior economist at the Center for Economic and Policy Research told the Intercept that the move to repeal the fiduciary rule “could put retirement income at risk and may be more costly than the individual investor recognizes.” Applebaum added, “The financial adviser will know, but they’re now under no obligation to divulge.”