The President betrayed his working-class political base by betting on Wall Street interests over private retirement savings. With one executive order he rolled back a rule that would protect savers while favoring stock traders, advisors and the financial industry.
You would have thought that financial advisors are bound to prioritize the “interests” of the retirement savers asking them for advice. But it’s not like that. Their only commitment is that they will advise what they deem “appropriate.”
The difference between both words means thousands of millions of dollars in profits for the industry, and the risk that tens of millions of people who made sacrifices to get some extra savings in their retirement will see their money go to waste.
Under the President Obama administration, a financial reform was approved seeking to prevent a repeat of the causes that led to the mortgage crisis and the Great Recession. The Department of Labor included a fiduciary rule to protect private retirement savings, bringing greater transparency to investments.
The rule, which was planned to take effect in April, made it mandatory to seek the best for the client and for the trader to disclose any commission he may receive for selling certain financial products. Experience says that, under a rule of this kind, the number of traders decreases, the sector consolidates and it stops being the Wild West.
Wall Street loudly complained because the current conflict of interest against savers pays off at least $2,4 billion in commissions yearly. Republican hatred to the reform is comparable with that of Obamacare.
The announced reasoning behind rolling back the rule is to give savers more options – that free market is good for consumers.
But what the order’s text explains is that it suffices that it will cost Wall Street money to prevent its implementation.
Savers whose money was in long- and medium-term Wall Street investments where the biggest losers when the 2008 crisis wiped out billons of dollars. The hefty commissions on financial products were cashed in long before their value collapsed.
Wall Street is finding new ways to go back to the old tricks that caused the crisis. Blocking the fiduciary rule will help them greatly, as private retirement savings will be as vulnerable to greed as before.