“Political language – and with variations this is true of all political parties, from Conservatives to Anarchists – is designed to make lies sound truthful and murder respectable, and to give an appearance of solidity to pure wind.” George Orwell
The Department of Labor’s recent fee disclosure rules have brought out another government buzzword. This time it’s “transparency.” While the word may sound new to people not familiar with government schemes, its purpose is the same: to obfuscate the truth. Unfortunately, the very people with the fiduciary responsibility of overseeing trillions of dollars of retirement plan participants’ money – namely human resource managers, chief financial officers, and business owners – have no better understanding of this subterfuge than anyone else. For this reason, when speaking with people in these positions, the typical response I receive when suggesting that they may not fully understand the corruption, conflicts of interest, and excessive and hidden fees that continue to plague the retirement plan industry is: “Everything now must be disclosed” despite the fact that they still have no idea how much money service providers are taking from participants’ accounts nor how these providers make their money. Ironically, this false sense of security creates a moral hazard by making plan sponsors less likely to actually fulfill their fiduciary responsibilities of monitoring their service providers, asking about conflicts of interest, benchmarking their fees, and fully understanding and complying with the fee disclosure rules. It’s almost as if the government aims to turn people into criminals in order to solidify the power of the largest retirement plan service providers who control the industry.
Those who act in a fiduciary capacity should clearly bear some of the blame, but if we want to understand the real cause of the retirement plan racket, we must turn to central economic planning – especially public education which has turned so many of us into mindless automatons. How else can it be explained why so many people in charge of protecting people’s money lack the critical thinking skills to ask the most basic questions of retirement plan service providers – questions like “How do you actually make your money?” or “How much money in hard dollars did you make from our plan last year?” Given the unrestricted access we now have to technology, retirement plan fiduciaries have no excuse to plead ignorance. A simple Google search for retirement plan fees can level the playing field very quickly.
Those who serve and represent the industry should know better as well, but they tend to view problems through the lens of central economic planning and focus on how central planners should solve our problems rather than if they should do so. The fiduciary standard debate serves as a good example. This debate centers on whether these planners should require that brokers adhere to the fiduciary standard instead of the suitability standard which does not require that a broker act in a client’s best interests. As a registered investment advisor who acts in a fiduciary capacity and has harshly criticized brokers, there is nobody who would like for advisors to act in their clients’ best interest more than me. However, rather than spend my time trying to add more energy to the system that created the same problems we are now trying to solve, I choose to direct my energy into my own business and educating people through voluntary and peaceful means which are far more effective as illustrated by how much easier it is to understand retirement plan fees by visiting my website as opposed to the confusing maze of information put out by the Department of Labor. Albert Einstein reflected this belief when he said, “We cannot solve our problems with the same thinking we used when we created them.”
This centralized retirement planning system is characterized by a partnership between large politically connected businesses and government and an industry-wide revolving door between public and private sector employees, two defining characteristics of economic fascism. Former SEC attorney Edward Siedle and economics professor Thomas DiLorenzo have separately provided parallel accounts of this revolving door in both our current investment industry and Benito Mussolini’s fascist regime. The similarities are eerie and should not be dismissed as hyperbole as we must examine economic regulations in light of the coercion that distinguishes all forms of central planning.
Another characteristic of fascism is the restricted ownership of resources in which private businesses retain ownership, but the state exercises control over how resources are used. For example, while people are free to invest in a 401(k) plan or IRA, the government places restrictions on the level of contributions and types of investments people can choose as well as the kinds of services and advice they are able to receive in connection with their retirement plans. Furthermore, the government even restricts the tax deductibility of IRAs for participants who earn above a certain income if they already participate in a 401(k) plan. There is even a possibility that traditional IRA contributions will be eliminated which will steer even more contributions to 401(k) plans and thus create an even greater windfall for the politically connected 401(k) service providers who lobby through industry groups to ensure the government enacts legislation that favors their interests at the expense of their customers and competitors. In fact, one small retirement plan provider actually had to raise its fees in order to comply with the new fee disclosure rules when its website already clearly disclosed all of its fees! Consequently, while capitalism gets blamed for the failure of our retirement plan system, it is the government’s restrictions on the use of resources and crony capitalism that are causing the erosion of people’s retirement savings. As Sheldon Richman, writer and Vice President of the Future of Freedom Foundation noted, “As an economic system, fascism is socialism with a capitalist veneer.”
These restrictions result from a vertically integrated and institutionalized power structure. Southwestern Law School professor Butler Shaffer has cited the observations of various historians regarding the idea that “institutionalization – with its insistence on regulatory conformity, standardization, and the protection of existing organizational interests – has been a principal cause of the collapse of previous civilizations.” For this reason, understanding the retirement industry in this context might help us understand its true nature and the effect that dependency on politically driven systems has on our lives.
Some people, however, believe that “hope and change” depend on the party in office, but the only real difference is what each party does with our money after they steal it. It’s time we expose central planners for who they really are: people who seek power over others for their own benefit at the expense of those they rule.