Dear Mr. Market:

We don’t typically venture into topics that involve politics as they can be polarizing to say the least. Everyone can think of an individual they know that is always more than willing to share their political opinions whether you want to hear them or not! From time to time, however, there is a topic that needs to be addressed and political party affiliation has absolutely nothing to do with it … It’s a matter of doing what is right.

Recently the Department of Labor issued a new proposal addressing investment management fees associated with retirement accounts. According to a report issued by the White House Council of Economic Advisors, a difference of only one percentage point in fees equals $17 billion! This is money that will either remain in individual’s retirement accounts or find its way to brokers and financial firms’ pockets.

There have been other versions of this legislation proposed in the past. This most recent version requires any advisor that is compensated for providing advice with retirement accounts (IRAs, 401(k), 403(b), Simple IRAs and SEP IRAs for example) to operate as a fiduciary, always putting the clients interests first. Why is this even a debate?! What it essentially comes down to is the mighty dollar.

Let’s take a moment to put this in perspective. If an investor is working with a fee-only Registered Investment Advisor (RIA) that is charging a flat 1% as compared to an advisor that is buying loaded mutual funds or other expensive products (UITs, annuities and various insurance policies) the difference in the first year alone could be as much as 4% to 5%! When you figure each percentage point accounts for $17 billion, a difference of four percentage points would be over $65 billion! The amount of assets this legislation addresses is astounding: over $7 trillion in IRAs, $5 trillion in 401(k) plans and $3 trillion in pension plans (source: DOL.GOV). Financial firms that operate in a commission based or non-fiduciary compensation model have their financial future potentially at risk.

Congresswoman Ann Wagner of Missouri has been outspoken in her opposition of this legislation. She was recently quoted as saying, “They seem to be doubling down on another massive rule-making that is going to harm thousands of low and middle-income families. Once again, I find the White House offering a solution in search of a problem, and we’re going to push back on behalf of Americans trying to invest their hard-earned money and save for their families.” Talk about a “wolf in sheep’s clothing”…Who on earth thinks this is protecting your best interest?!?

It is certainly not a coincidence that the second largest lobbying group in Washington D.C. is the Insurance and Financial Services Industry with over $40 million contributed to politicians year to date (2015), second only to Pharmaceutical/Health Products. Since 1998 the Insurance/Financial Services Industry has contributed over $2 billion dollars to politicians! According to public records three of the top 10 contributors to Congresswoman Wagner are financial companies with more than $650,000 of donations over her career. It is also ironic that all three of the companies do not operate on a fiduciary level with their clients (Edward Jones, Northwestern Mutual and Wells Fargo).

We will let you connect the dots … the facts and figures speak for themselves.

So what is an investor to do?

While this legislation is being debated investors need to take control of their own finances. The finger-pointing and name-calling will most likely take place in Washington D.C. for some time to come. Working with a financial professional that operates as a fiduciary is the first step in the right direction. It is your hard-earned dollars, so shouldn’t every penny of it be invested in your own best interest?

We welcome your comments and questions.

Sources:  Top Contributors, Wagner Summary, U.S. Dept. of Labor, U.S. Dept. of Labor Fact Sheet