Do you believe Donald Trump is a “prudent man” capable of rationally, intelligently managing your … [+]
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Regardless of whether you love or hate him, do you believe Donald Trump is a “prudent man” capable of rationally, intelligently managing your pension, your 401(k) and your health care? Like it or not, he’s taking unprecedented action that jeopardizes the retirement security and health of millions of Americans.
Can Donald Trump Meet “Prudent Person” Standard?
The prudent person rule is a guideline for making financial decisions using the principles of common sense and reasonable risk. The rule is commonly cited as the legal standard for trustees and guardians responsible for overseeing assets of others. Federal rules for managing pension funds contain similar prohibitions against reckless decision-making.
The prudent person rule sets a reasonable expectation that the person will make rational, intelligent decisions when making investment choices on your behalf.
Do you believe Donald Trump is a “prudent person” who can be trusted to make rational, intelligent decisions with respect to your retirement savings?
Trump and the U.S. Labor Department a month ago directed the Federal Retirement Thrift Investment Board charged with overseeing billions in a retirement savings fund for federal employees and members of the military to halt plans to invest in Chinese companies.
Trump claims he acted to protect millions of federal employees from investing billions of their retirement savings in risky Chinese companies that pose a threat to U.S. national security.
Investor protection and risk reduction was supposedly the basis for Trump’s unprecedented decision to roll up his sleeves and get actively involved in management of the federal pension plan.
The prudent person rule doesn’t require a person with a fiduciary responsibility over the assets of others to have extraordinary expertise and clearly Trump has no expertise in pension matters. However, using retirement plan assets for political advantage—as leverage in negotiations with the Chinese and to further his re-election chances—is prohibited.
More recently, Trump’s Department of Labor opened the door for plan sponsors to add private equity funds to their 401(k) plans. Trump claims removing the barriers to private equity in 401(k)s will allow American workers to overcome the effects the coronavirus has had on our economy.
That is, private equity gambling gains will make up for pandemic losses. Call it “Coronavirus Catch-Up.”
That sounds like “advice” you’d expect from a past or present casino owner, not a “prudent person” charged with protecting employee retirement savings.
According to the DOL press release, Chairman of the U.S. Securities and Exchange Commission Jay Clayton commended the Department for improving investor protection by allowing private equity into 401(k)s.
Once again, investor protection—not securing private equity industry political support—was Trump’s justification for the decision.
Never mind that private equity funds lack all of the hallmarks of prudent investments, are the highest cost, highest risk, least transparent and most illiquid of investments.
Chinese stocks are too risky for federal workers, says pension fiduciary Trump, but high risk, high cost private equity funds are worthy gambles for 401(k) retirement savers.
Trump Making Health Care Decisions?
Now, imagine your mother, father or child in a hospital, and critical decisions regarding health care must be made. Would you invite Trump into the room to rationally, intelligently participate in making life and death decisions? Would you trust him to compassionately protect the health of those you love?
As coronavirus cases rise in more than half of the states, Trump is urging the Supreme Court to overturn the Affordable Care Act. More than 20 million Americans could lose their health coverage and protections for people with preexisting health conditions also would be put at risk if the court agrees.
If Trump, the prudent man, capable of acting solely in the best interests of Americans and for the exclusive purpose of the nation—avoiding all real and potential conflicts of interest—exists, it’s time he showed himself.