Donald Trump continues to sell out the middle class and working class to favor Wall Street. In a move that is certain to cripple workers retirement savings accounts, Trump signed an executive order enabling financial advisors to rip off workers by draining their 401(k), The Intercept reported Tuesday.
The move could prove a lifeline for a surprising beneficiary: the private equity industry.
Last year, the Obama Administration issued a fiduciary rule to protect workers who are saving for retirement from predatory equity firms. The rule would have forced investment advisers in workplace retirement plans like 401(k)s to operate in the workers’ best interests, rather than recommending high-cost, high-risk products that offer the advisers kickbacks and perks.
But Trump’s Executive Order order directs the Labor Department to review the rule, which is expected to initiate the process of rescinding it.
Private equity firms have long sought to have the freedom to control their client’s retirement accounts. Now, their friend Donald Trump has given them such control.
On the same day that he issued his fiduciary rule executive order, Trump met with his White House jobs panel, headed by Steven Schwarzman, CEO of the world’s largest private equity firm, Blackstone.
“We’re getting rid of your regulations,” Trump told Schwarzman and his colleagues on Friday.
With regulations out of their way, plan advisers would not be required to act in the best interest of their clients when promoting target funds, enabling them to include private equity, regardless of the fee structure or threat of losses.
“It could put retirement income at risk and may be more costly than the individual investor recognizes,” said Eileen Applebaum. “The financial adviser will know, but they’re now under no obligation to divulge.”
As The Intercept reports, advisers could also receive hidden kickbacks for including these investments in the target funds. There’s already a large cottage industry of perks for financial advisers, most of them obscure to individual 401(k) subscribers.
According to a study conducted by researchers at Indiana University, the University of Texas and the Federal Reserve last October, plan advisers routinely present limited choices to 401(k) investors, to steer them into unnecessary or risky options. This favoritism benefits affiliated funds, and with private equity perks in the waiting, advisers would have yet another incentive to tout their products.
There you have it. Americans have been CONNED.