When federal “regulators” go boldly where no regulator has ever gone before–to promote retirement … [+]
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Private equity—speculative investments in the stocks of companies not publicly traded and hard-to-value—“has the potential to hasten the retirement day for American workers,” Trump’s DOL Deputy Secretary recently gratuitously advised. Trump’s SEC Chairman Jay Clayton is also pushing 401k sponsors to roll the dice. When feds go boldly where no regulator has ever gone before—promoting gambling in retirement plans—WATCH OUT! Far more likely, these costliest, riskiest, most secretive investments ever devised by Wall Street will postpone or outright destroy American workers’ retirement dreams.
Last week , Patrick Pizzella, the Deputy Secretary of Trump’s Department of Labor gratuitously advised Barron’s readers in Main Street Deserves Access to Private Equity, Too that private equity—investing in stock of companies that aren’t publicly traded—”has the potential to hasten the retirement day for American workers by fortifying retirement savings during both stable and unstable economic times and helping to diversify and build retirement income.”
As an expert who has provided forensics training to hundreds of DOL investigators at federal facilities around the country, I’m shocked at what I’m hearing.
Pizzella, speaking as an senior official of DOL, is suggesting that American workers on Main Street deserve the opportunity to gamble their life’s savings on the costliest, riskiest, most secretive investments ever devised by Wall Street— just like sophisticated, wealthy investors who can afford to lose it all.
American’s workers deserve the right to be fleeced? Hardly sounds like a winning campaign slogan.
He also indicated that in a recent information letter, the Department of Labor made clear that 401(k)s may give participants the option of investing in funds that include private equity. Evidently the Deputy Secretary believes “may” really means “should” or “must” offer private equity.
For openers, to the best of my knowledge, American workers are not clamoring to pay greater fees to take greater risks with their already struggling retirement savings. Again, to the best of my knowledge, corporations which sponsor 401ks are increasingly turning to lower cost, lower risk investments, such as index funds, consistent with their fiduciary duties under federal law, i.e., ERISA.
Deputy Secretary Pizzella, show me a single corporate 401k sponsor who is eager to increase costs and risks to workers. And, as the nation’s leading expert in investment forensics, I can assure you there isn’t a single corporate sponsor who has the requisite training to select and monitor high cost, high risk, secretive, hard-to-value private equity funds.
Having trained DOL investigators, I can also tell you there isn’t anyone at DOL up to the task.
To further prove my point, in a leaked intelligence bulletin published recently, the FBI wrote that it has high confidence that hostile foreign powers and criminals could use hedge and private equity funds “to launder money, circumventing traditional anti-money laundering programs.” The FBI has noted that law enforcement and regulators are not equipped to investigate money laundering at the non-traditional asset managers.
If law enforcement and regulators are not up to the task of ferreting out criminal money laundering, what are the chances sponsors of 401ks are?
Toward the end of his rant, Pizzella issues this impassioned cry for justice:
“The time of wealthy investors and defined-benefit plans taking advantage of private equity while Main Street Americans are excluded must end. This is why the Trump administration and the Department of Labor are committed to doing everything within their authority to bulldoze barriers that disadvantage Main Street.”
Mr. Deputy Secretary, America doesn’t need regulators at Trump’s DOL and SEC to go boldly where no regulator has ever gone before—promoting gambling in retirement plans.
That’s not your job— you’re supposed to be protecting workers and investors.
Hopefully, corporations sponsoring 401ks and Main Street workers will not be “bulldozed” into risking retirement savings.